Image by David Liuzzo
Russians have long been placing money in Latvian banks due to the perceived lack of ‘attention to detail’ when it comes to sources and uses of funds; i.e., dirty money and illegal transactions. European Union regulators have focused on the problem since 2015, and it seems more recently as well, concerning illegal avoidance of sanctions on North Korea.
Two more Latvian banks have been fined regarding the sanctions issue, bringing the total to five and the investigation is ongoing, reported Bloomberg News. Deposits are down 28% since 2015 due to the crackdown.
The Latvian regulator, the Financial and Capital Market Commission said Friday in a statement, Norvik Banka agreed to pay 1.3 million euros ($1.5 million) and Rietumu Banka will pay 1.6 million euros.
“The measures taken in this case are a lesson to all the banks in Latvia not to be used for suspicious deals,” said Peters Putnins, the chief regulator. American law enforcement authorities were involved in the investigation.
Norvik “in close cooperation with the Commission, has reviewed its client portfolio, developed a very concrete corrective action plan and will be investing upwards of 2 million euros over the coming 18 months in ensuring compliance with all regulatory and best-practice requirements,” Oliver Bramwell, the lender’s chairman, wrote in a statement, reported Bloomberg News.
Due to the highly corrupt nature of the Russian economy, and other former Soviet territories, most wealthy Russian citizens place money outside the country to avoid it being seized or stolen. Russians are also very adept at offshore shell companies and hiding funds in financial jurisdictions that don’t have the best reputation for the rule of law. Latvia has been one of these locations, as well as Cyprus, and others.