Regulator fines Citadele bank nearly 650,000 euros

Latvia's financial regulator, the Financial and Capital Market  Commission (FKTK) said April 30 it is fining retail bank Citadele nearly 650,000 euros for failures in its approach to countering money laundering.

"In 2018, the FKTK carried out a regular on-site inspection of the Bank, identifying certain shortcomings in the field of anti- money laundering, counter-terrorism and counter-proliferation financing (AML/CTF/CPF)," FKTK said.

"The Bank had not provided for sufficient operation of individual internal control system components for the management of money laundering and terrorism financing risks inherent in its activities and customers; e.g. in some cases it had not obtained and documented supporting information on the customer's beneficial owner; in some cases it had not paid sufficient attention to all complex, unusually large inter-related transactions and had not obtained documents supporting the business of customers and in some cases it neither had ensured timely and high-quality customer due diligence and documentation, nor had decided properly on the termination of business relations with the customer, if it has not been possible to conduct enhanced customer due diligence," the regulator said.

Consequently FKTK has imposed a fine of EUR 647,070 on the bank for "irregularities in the field of AML/CTF/CPF".

The Bank has since developed an action plan for the improvement of the internal control system for the management of money laundering and terrorism and proliferation financing risks which needs to be implemented by the end of this year, the regulator said, and the bank has promised to spend more than 2 million euros on "strengthening of the internal control system in the field of AML/CTF/CPF in 2020."

No explanation was given as to why it took two years to impose the penalty on the bank, and the fining of Citadele may be a cause for some embarassment as it is the bank FKTK chose to disburse payments following the collapse of ABLV bank in the wake of accusations of institutionalized money-laundering by U.S. regulators.

In its own response to the fine, Citadele lost no opportunity to downplay the seriousness of the penalty. Indeed, it did not even use the word 'fine', preferring instead to describe it as a 'remediation fee'.

"The Bank will pay a remediation fee of EUR 647 070. Setting the amount of remediation fee, the FKTK has taken into consideration that the AML/CFT risk level that characterizes the Bank’s clients base and financial services is very low," the bank said on its website.

There were only "a small number of alleged shortcomings on certain limited occasions whereby the client’s beneficial owner was not sufficiently proved or documented," the bank said.

"Also, on certain limited occasions, it was not fully ensured that the documentation proving the client’s economic activity have been acquired in sufficient scope and quality. However, all customers with the identified shortcomings were already closed or in the closing process as per decisions taken by the Bank prior and independently of the FKTK audit," it added.

Citadele Bank, established from the wreckage of the notorious Parex Bank, launched on August 1, 2010. In late 2008 the Latvian government took over Parex, the second largest bank in Latvia at the time, to save it from financial straits during the global financial crisis. On March 23, 2010, the Latvian government ruled to restructure Parex by separating part of the assets to create Citadele Bank, as well as the recovery agency Reverta.

In 2014 it was bought by a group of international investors led by U.S. private equity firm Ripplewood.

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