A guide to the rest of Latvia's non-resident banks

Take note – story published 6 years and 2 months ago

Latvia's non-resident banks -- financial institutions with a large proportion of clients based in other countries -- are attracting a lot of international attention at the moment, for all the wrong reasons.

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Front pages around the world have routinely castigated them as funnels for illicit flows of cash, mainly from Russia, but the stories rarely take the trouble to describe the individual banks, nor explain why attempts to toughen up the sector failed to go far enough, prompting U.S. authorities to unload both barrels at ABLV bank, sending it into almost immediate liquidation. 

Probably the most notorious non-resident bank of all, Trasta Komercbanka, is in the latter stages of being wound up after having its license pulled two years ago after a dizzying sequence of money laundering scandals.

Estonian-owned Versobank was also shut down temporarily by the regulator in 2016 because it had no physical presence in Latvia but in 2017 had its right to do business in Latvia restored.

Just a year ago, the Financial and Capital Market Commission was playing down the threat posed by the non-resident sector and even suggesting to LSM that the term "non-resident" should be replaced with the description "foreign clients". However, "non-resident" now seems to be back in widespread use.

Most of the non-resident banks are of much smaller scale than the main retail banks, but there are so many of them that they still make up a considerable part of the Latvian financial sector. The proportion of non-resident deposits has fluctuated quite dramatically over the years, sometimes even outweighing domestic deposits.

In 2015, the balance of non-resident deposits grew by 954 million euros or 8.3% reaching 12.4 billion euros but then the application of enhanced anti-money laundering requirements and other factors reduced the volumes of foreign deposits in Latvian banks by almost one third (-3.3 billion euros). By the end of 2016, resident deposits in Latvian banks totaled 12.2 billion euros (57%), while non-resident deposits totaled 9.2 billion euros.

But with Finance Minister Dana Reizniece-Ozola saying the non-resident banks will have to change their business models, and continuing pressure from the U.S. authorities for Latvia's banks to clean up their acts, speculation is inevitably rife as to which of them might be next to face a crisis. 

Therefore with the increased possibility that one or more of these banks could also hit the headlines in the not-too-distant future, here is a concise guide to who exactly are Latvia's remaining non-resident banks.


Latvia's non-resident banks


The graphic below from the Organized Crime and Corruption Reporting Project shows the main banks used in the so-called Russian Laundromat scheme. As you can see, Latvia's non-resident banks make frequent appearances.

OCCRP graphic of "Russian laundromat" banks
OCCRP graphic of "Russian laundromat" banks

Name Assets (Dec. 2017) Self-description Comments
Meridian Trade Bank €294m "We highly value each customer, as well as the opportunity to serve as a bridge between East and West in the formation of international business relations." Formerly known as SMP bank and formerly owned by the Russian bank with the same name. Located right opposite the main government building in Riga. Has offices in Moscow, Kaunas and Vilnius. Fined 889,000 euros in November 2017 for failure to ensure adequate internal control functions in the area of credit risk management.
Signet Bank


"Prosperity loves discretion. Tailor-made banking solutions for long-lasting wealth management, designed for trustworthy circle of high-net-worth individuals."

Formerly known as Bank M2M Europe, and before that known as Latvijas biznesa banka . CEO Robert Idelsons used to be a top executive at Parex bank's asset management company. Former shareholder was controversial Russian businessman Andrey Vdovin but the bank has re-jigged its structure as well as rebranding itself. Fined €55,000 euros in November 2015 for failures in due diligence.
BlueOrange Bank €681m "Our clients live and work in more than 90 countries. We combine highly personalized service and up-to-date technologies, which means you can use our service wherever you are." Formerly known as Baltikums bank. Fined €35,000 in June 2017 for failures linked to North Korea's missile program as reported by LSM. Alleged to have been one of the main banks involved in the so-called Russian Laudromat scheme, along with Trasta bank, ABLV and other Latvian banks. Baltikums also features in a scandal involving payments to an Italian MEP by the government of Azerbaijan.
Baltic International Bank €320m "One of Latvia’s most experienced banks in the field of providing individual, tailor-made services, offering high-quality financial products and investment solutions based on the principles of the ESG (Environmental. Social. Governance)." Headed by Valeri Belokon, a high-profile businessman who will be familiar to fans of Blackpool FC in England. Supervisory Board members include former CIA and State Department counter-terrorism expert Joseph Cofer Black and German diplomat Hans Friedrich von Ploetz. Fined €1.1 million in March 2016 for "repeated violations" of money laundering rules plus other sanctions imposed. Mentioned as one of the banks through which "Magnitsky" money was passed. Was paid a visit in 2012 by Donald Trump Jr. BIB was also linked to a controversy involving Kyrgyz officials. 
Norvik Bank €857m "Norvik Banka ensures excellent precision of services – it is evidenced by the highest awards received by the bank annually from international financial institutions (Deutsche BankCommerzbank AG, etc.). The key values of Norvik Banka are satisfied customers and high servicing quality." Recently in headlines after Anglo-Russian owner Grigory Guselnikov accused central bank governor Ilmārs Rimšēvičs of soliciting bribes. Fined 1.3 million in July 2017 for North Korea sanctions busting and other failures. Supervisory board members include former NATO Secretary General Anders Fogh Rasmussen. Warned in March 2016 for breach of Credit Institution Law.
Rietumu Bank €3.1bn "Rietumu was the first bank in Latvia to offer its customers full advisory services and support in obtaining the residence permit in Latvia. We help our customers to become EU residents since July 2010, when amendments to the Immigration Law of Latvia came into effect." Irish financier Dermot Desmond is a 33% shareholder via his Boswell Consulting company, as is the bank's founder Leonid Esterkin. Offices in Russia, Romania, Ukraine, Belarus and Kazakhstan. Fined €80 million by French courts for helping a tax avoidance scheme for French citizens operate. The bank says it will appeal. Also fined 1.5 million euros in July 2017 by the Latvian regulator for North Korea sanctions busting and other failures. Fined €35,000 in May 2015 for money laundering failures. Quit the Association of Latvian Commercial Banks (ALCB) in March 2016.
Reģionālā investīciju banka (Regional investment bank) €395m "We have time to dedicate special attention to customers every day, and coffee will be served exactly as you like it." Strong ties to Ukraine via shareholders Yuri Rodin, Pivdennyi bank and Mark Bekker and board member Andrii Homza. Mentioned in a 2013 4CADS report on arms smuggling operations and a US Securities and Exchange Commission filing from 2009 indicates it as the destination for money a $11 million Ponzi scheme. Fined €70,000 in July 2014 for money laundering and due diligence failures. Warned and fined €570,000 in June 2017 for North Korea sanctions busting and internal control failures.
LPB €235m "Each employee individually and the bank as a whole, are focused on success. Being perfectionists, we do our best to guarantee our partners, customers, and employees the best service and an attitude of the highest quality." Formerly known as Latvijas pasta banka (Latvian postal bank). Controlled by import company Mono, whose owners also make up the bank's council. Fined €305,000 in July 2016 for failing to stop massive payments through its accounts in connection with a billion-euro 2012-2013 Moldovan fraud according to a report by independent financial investigators Kroll, carried out for the National Bank of Moldova.
Expobank €227m "The Bank and its branches service customers from over 70 countries. The Bank`s long-term development and growth is based on regular development of risk management processes and compliance control systems, as well as on highly selective customer acquisition." Formerly known as LTB bank. Owned by secretive Russian businessman Igor Kim who bought Expobank Russia from Barclays and launched a Latvian subsidiary "actively cooperating with and is a partner of the Russian Экспобанк proving the whole range of banking services in the territory of Russia". Offices in Latvia, Cyprus and Luxembourg. Warned over due diligence and anti-money laundering systems in November 2014, fined €105,000 in October 2015 for the same thing, 
Rigensis bank €289m "Rigensis Bank mission is to provide high quality tailor-made banking services to high net worth individuals, their family offices and holding companies... The Bank has developed an appropriate internal control and risk management system in line with best practice standards." Established in June 2011 by Russian businessmen Igor Tsyplakov, Alexei Gudaytis and Dmitry Sokolov under the aegis of Russia's ICT Group and ICT Holding which has major interests in rail freight, gold and coal mining and real estate as well as a holding in Credit Bank of Moscow. Uniquely among non-resident banks, Rigensis bank has yet to fall foul of the regulator.
PrivatBank Latvia €258m

"Residence permit in the country of the European Union - the first step towards your goal! VIP Clients Service Department of PrivatBank gladly will provide you with advice and legal support."

Formerly known as Paritate bank. Since 2007 part owned by Ukraine's (recently nationalized) PrivatBank, which is now seeking to offload its Latvian operation as it has its own set of massive fraud scandals to deal with. Chaired since April 2016 by Briton Aleksandar Kukic. In December 2015 it was subjected to a 2 million euro fine and told to change its board after it was alleged to have helped transfer huge amounts of cash stolen from Moldovan state coffers. In June 2017 it was fined €35,000 for North Korea sanctions busting. Mentioned as another bank chanelling "Magnitsky" money.




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