Another bank hit with massive fine

Take note – story published 8 years ago

Latvia's financial regulator, the Financial and Capital Markets Commission (FKTK) announced Wednesday it was slapping its second-largest fine ever on Baltic International Bank (BIB) in the latest evidence it is finally cracking down on money laundering after years of denying it was even a problem.

In a statement released Wednesday evening, FKTK said it was fining Baltic International Bank €1.1m and the chairman of BIB's board, Ilona Guļčaka, a further €25,000 for "repeated violations" of money laundering rules and "engaging in a series of transactions that subjected the bank to a significant money laundering and reputational risk."

The language is reminiscent of that used last week when FKTK revoked the operating license of Trasta Komercbanka, which like BIB specialised in catering to the needs of non-resident cientele mainly from Russia, Ukraine, Kazakhstan and other former CIS countries.

Guļčaka was singled out for not doing her job properly for a remarkable TWELVE years from 2003-15 in the FKTK statement, raising the obvious question of why it took so long to act.

FKTK also warned that future infringements would "not be tolerated" - a broad hint that BIB can also expect to get its license pulled unless it gets its act together immediately.

BIB is owned by Valerijs Belokons, a businessman who also numbers England's Blackpool football club in his ownership portfolio.

Latvia is struggling to convince members of the Organization for Economic Security and Cooperation (OECD) its financial system is clean and it should be admitted as a member.

As a result, after years of denying money laundering was a major problem, the regulator has in recent weeks handed out penalties aplenty including a record-breaking €2m fine for the local division of Ukraine-owned PrivatBank.

EDITOR'S NOTE: Some weeks after the publication of this story, LSM was contacted by Baltic International Bank (BIB) which requested clarification of the statement: "Guļčaka was singled out for not doing her job properly for a remarkable TWELVE years from 2003-15."

BIB argued that as FKTK's investigation did not cover the entire twelve year period of Ms Guļčaka's employment but only a four-year period 2011-2015, the statement could be damaging to the bank's reputation.

LSM requested clarification from FKTK and asked if FKTK was confident Ms Guļčaka had carried out her duties properly during her first 8 years with the bank. FKTK gave the following response:

"1) for the period from 2003 to 2015, the chairperson of bank's board, I.Guļčaka had been responsible for the anti money laundering/combating financing of terrorism issues in the bank;
2) deciding on the amount of fine, FKTK took into consideration that I.Guļčaka had failed to take appropriate and timely measures to prevent involvement of the bank in suspicious transactions.

"Yet the statement of  point 2 does not refer to all the period of 12 years – FKTK has not strictly indicated that inadequate conduct of Ms Guļčaka did not relate to the entire period, therefore it could be regarded as some kind of interpretation of information."

LSM is happy to clarify this matter.

The full decision regarding the ruling against BIB can be read HERE.

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