The extraordinary speech by Treasury Under Secretary Sigal Mandelker in front of the Securities Industry and Financial Markets Association Anti-Money Laundering & Financial Crimes Conference in New York went on to say:
"ABLV has institutionalized money laundering as a pillar of the bank’s business practices. Illicit financial activity at the bank includes transactions for parties connected to UN-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles. In addition, ABLV has facilitated transactions for corrupt politically exposed persons and has funneled billions of dollars in public corruption and asset stripping proceeds through shell company accounts. ABLV failed to mitigate the risk stemming from these accounts, which involved large-scale illicit activity connected to Azerbaijan, Russia, and Ukraine."
ABLV NPRM 20180212 (Final for FR Submission).pdfDownload
As a result, U.S. authorities on February 13 issued a "Section 311 finding" under the terms of the Patriot Act against the bank, a measure that grants the Secretary of the Treasury the authority, "upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, institution, class of transaction, or type of account is of 'primary money laundering concern,' to require domestic financial institutions and financial agencies to take certain 'special measures' against the entity of primary money laundering concern."
These special measures range from requiring additional due diligence and special attention concerning particular account transactions among U.S. financial institutions to prohibiting the opening or maintenance of any correspondent or payable-through accounts.
A report on the bank explaining why the action was taken makes startling reading, saying there are "reasonable grounds to believe that ABLV executives, shareholders, and employees have institutionalized money laundering as a pillar of the bank’s business practices. As described in further detail below, ABLV management permits the bank and its employees to orchestrate and engage in money laundering schemes; solicits the highrisk shell company activity that enables the bank and its customers to launder funds; maintains inadequate controls over high-risk shell company accounts; and seeks to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules in order to protect these business practices."
The report also states that "Through 2014, for example, Ukrainian tycoon Serhiy Kurchenko funneled billions of dollars through his ABLV shell company accounts."
A further revelation says: "ABLV facilitated transactions related to North Korea after the bank’s summer 2017 announcement of a North Korea “No Tolerance” policy."
And it continues: "Ninety percent of ABLV’s customers are high-risk per ABLV’s own risk rating methodology and are primarily high-risk shell companies registered in secrecy jurisdictions."
The amounts funneled amount to "tens of billions of dollars" the report adds.
If you thought things couldn't get more serious, think again: "These concerns are further
supported by the fact that ABLV management seeks to obstruct enforcement of Latvian
AML/CFT rules and has used bribery to influence Latvian officials," the report says.
The recommended action is to freeze ABLV out of the U.S. financial system completely.
"We are resolved to use our economic authorities to take action against foreign banks that disregard anti-money laundering safeguards and become conduits for widespread illicit activity, including activity linked to North Korea’s weapons program and corruption connected to illicit actors in Russia and Ukraine," Mandelker told her audience.
Mandelker is no mere bank functionary, holding the position of Under Secretary for Terrorism and Financial Intelligence, with a specific remit to "combat terrorist financiers, weapons of mass destruction proliferators, money launderers, drug kingpins, and other national security threats."
Almost as eye-catching as the uncompromising speech itself was the fact that it was delivered as keynote at such a high-profile event - which would seem to send a clear message to Latvia that the U.S. is in no mood to tolerate banks suspected of money laundering, even in countries with cordial relations with Washington.
The Latvian financial regulator the Financial and Capital Markets Commission (FKTK) told LSM late on Tuesday it "has taken relevant supervisory actions" without specifying what those actions might be.
"The FKTK would like to emphasize that the operation of ABLV Bank continues and the bank is responsible for further solutions management, communication and work with the authors of the statement. The bank is entitled to express its comments on the statement to the relevant US authorities within 60 days of publication," FKTK said.
The regulator "is becoming aware of the content of documents supporting the statement, as well as actively cooperates with the European Central Bank (ECB), as the ECB exercises direct supervision over this Latvian commercial bank," it said.
Also Tuesday night, the bank itself responded with a press release saying the Treasury report contained "outrageous defamatory information" and "uses obviously unfounded and misleading information" as well as an intention to protest to the U.S. authorities.
It insisted the operations of the bank were not affected in any way and that it adheres to all international standards.
ABLV is Latvia's third-largest bank by assets and the largest in the non-resident sector.