Ameet B Kabrawala, an Assistant United States Attorney in the Narcotics and Money Laundering Section of the U.S. Attorney’s Office for the Eastern District of New York, U.S. Department of Justice spoke to students, journalists, bankers and other interested parties at the Riga Graduate School of law.
"Money doesn't care where it's come from or is generated," Kabrawala said in an interesting and entertaining lecture.
"The eternal problem is explaining where the money's come from... we're finding that money is being hidden ll over the world in really creative ways," he said, adding that all such crimes rely on "one basic human trait: greed."
Kabrawala's experience suggests there are three essential stages of money-laundering:
1) Placement - putting money into the system
2) Layering - moving money around to hide its source
3) Integration - funding further criminal activity or spending proceeds
It's the second stage of the process that is particularly notable in a Latvian context, with the country having developed a widely-reported expertise in the use of multiple shell companies and complaisant non-resident banks to shift huge amounts of cash, mainly from Russia, Ukraine, Kazakhstan and other countries to the east.
"Layering is a serious problem here in Latvia. It's a place where there has historically been lax oversight in the financial services industry and as a result of that moving money through Latvia has become relatively easy and the banking system has been relatively opaque," said Kabrawala.
However, he did note that after two days of talks with regulators, law enforcement and other Latvian officials, things seemed to be improving and Latvia is trying to cooperate with its partners.
"Latvia is getting a bad name in the financial industry for allowing these suspect financial transactions and this money to be funneled through its banking system," he said.
"There's a way to move forward and change that, but it is a fact. It takes a lot of attention from government and from private industry to address those points."
Also in the audience was a Special Agent of the US Department of Homeland Security who also contributed his experiences in dealing with Latvia. Speaking to LSM on condition of anonymity, he confirmed that several years ago money laundering suspicions regarding a politically connected person were raised at one Latvian bank by that bank's anti-money laundering officer.
"The AML person at the bank said 'This is a politically exposed person. They are connected to a shell company. We don't know where this money is coming from.' And the president of the bank came down and over-rode their decision. That is a systemic failure at the bank. What I found surprising at my end was the president of the bank was never held responsible. No-one went to jail. That would be unheard-of in the US. That would be a huge scandal," said the Special Agent.
The bank in question is no longer operating but an investigation is ongoing.
The main attraction of moving money to or through a "back door into Latvia" is that, in doing so, money enters the "clean" European Union banking system, he added.
New innovations in the fintech sector, virtual currencies and things like pre-payment cards and store gift cards offer new opportunities for money-launderers, Kabrawala explained.
"[With very few exceptions] All crimes now are transnational. Criminals don't care about international borders but sovereign nations do care about international borders."