The Friday night announcement from the Financial and Capital Markets Commission (FKTK) said it had "applied the administrative fee in amount of 672 684 EUR for shortcomings in AML [anti- money laundering] area and in amount of 1 121 140 EUR for infringements of international sanctions" (sic).
An explanation from the regulator said the fines totalling 1 793 824 euros resulted from an inspection carried out way back in 2017 and a more recent one this year.
"[FKTK] initiated an onsite inspection related to regulatory requirements regarding the prevention of money laundering and terrorism and proliferation financing in 2017. During the inspection it was concluded that the further improvements of internal control systems were needed identifying that the main discrepancies are related to the fact that on certain limited occasions it was not fully ensured that the documentation proving the client’s economic activity had being acquired in a sufficient scope and quality to ascertain that the client’s transactions cannot be viewed as suspicious, as well as on certain limited occasions the client’s beneficial owner was not sufficiently proved or documented," the regulator said.
"In 2019 FKTK concluded the targeted inspection identifying the shortcomings in complying with Sanction Law, Regulation Nr. 269/2014 and Regulation Nr. 2018/1072 – in the case on one customer the Bank has not delivered all required actions to secure the correct and relevant information entry in the banks system, initiating and maintaining the cooperation with the customer. It has also not secured the sufficient control to safeguard the correctness of information entered in the system that lead to unblocking of funds for this certain customer, as a result the financial resources of the customer concerned were not frozen to a limited extent. One of the reasons for this standalone infringement was that the Bank was performing its clients, their owners and beneficiaries screening against European Union, Office of Foreign Assets Control (OFAC) of the US Department of the Treasury and other sanction lists, including the Bank`s internal lists, but did not use external lists of persons related to sanctioned persons that allows screening of sanctioned persons owned entities and could prevent similar cases."
The size of the fine reflected improvements the bank has made since, FKTK added.
In its own description of the circumstances leading up to the penalty, SEB said the review of its operations "has been ongoing since 2017".
It offered up an explanation for its failure with regard to international sanctions, saying that the million-euro fine was the result of very small transactions:
"After communication with FKTK, SEB Latvia has detected and reported a single case in relation to the European sanction list. The bank had not entered correct information regarding one customer’s direct owner. The customer was a subsidiary to a company that was added to the EU sanctions list after SEB Latvia had onboarded the customer. The connection was not discovered until after payments were carried out by the bank. The payments made were related to tax bills, phone bills and purchase of accounting and directory services. The total incoming payments amounted to 592 EUR and the outgoing payments amounted to 712 EUR. SEB Latvia terminated the relationship with the customer and reported the incident to FCMC as soon as the mistake was detected."
As recently reported by LSM, the Swedish financial regulator is also looking into SEB's Baltic operations, along with the operations of its competitor, Swedbank.