Financial regulator uncorks huge €2m fine

Latvia's financial regulator, the Financial and Capital Markets Commission (FKTK) late on Friday revealed it was handing out the harshest penalty it has ever delivered - by a long way.

In a statement on its website, FKTK said it was handing Ukraine-owned PrivatBank a 2 million euro fine and demanding that it change its board for its role in handling cash from an alleged billion-euro fraud in Moldova that has had massive political and financial ramifications in that country - but which until now has been largely ignored by the Latvian authorities.

The previous-highest penalty FKTK has given out was a €140,000 fine in 2013, and that didn't even include naming the bank being asked to pay it.

"[FKTK] decided to apply a fine of 2,016,830 (two million sixteen thousand eight hundred and thirty) euros to PrivatBank for irregularities inline with the Money Laundering and Terrorism Financing Prevention Act (NILLTFNL), Credit Institutions Act as well as "internal control systems of regulatory provisions" and "Customer due diligence regulatory rules' requirements," the FKTK statement said. 

FKTK also demanded the dismissal of Chairman of the Board Oleksandr Trubakov and board member Iveta Kerpe, and instructed the bank to fully replace the bank's Management Board. 

FKTK acknowledged that its actions came after the leaking of a Kroll report into the fraud perpetrated via the National Bank of Moldova which alleged a billion dollars had been transferred out of the country, crippling the national economy.

"FKTK has reason to believe that the bank had not taken all the necessary measures...Thus, the bank was involved in transactions that leads to a high reputational risk, money laundering and terrorism financing risk," FKTK said. 

The Moldova scandal has had massive political and financial ramifications in that country - but which until now has been largely ignored by the Latvian authorities.

Official statements released after recent meetings between officials from the two countries have been notable for not even mentioning the issue at all.

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