The European Central Bank (ECB) has withdrawn the authorization of Versobank AS to operate as a credit institution. The ECB followed a recommendation of the Estonian Financial Supervision Authority according to which Versobank had committed serious breaches of legal requirements, in particular concerning the prevention of money laundering and combating the financing of terrorism.
Following the decision of the Financial Supervision Authority, the ECB has suspended all transactions and operations of Versobank AS beginning from March 26 as well as all payouts to depositors and other creditors.
The Financial Supervision Authority also cancelled the identification code of Versobank AS, informed the Guarantee Fund about the withdrawal of the authorization, and filed an application with the court for the bank’s compulsory dissolution as well as the appointment of liquidators.
The supervisory board of the Guarantee Fund will meet to discuss the conditions for the compensation of deposits in Versobank AS.
The Financial Supervision Authority ascertained in inspections carried out between 2015 and 2017 that Versobank breached legislation concerning anti-money-laundering and the financing of terrorism as well as requirements on the provision of services in other member states of the European Union. The breaches were systemic and continuous, and the bank did not fully eliminate them even after their intervention, the Financial Supervision Authority said.
Versobank failed to eliminate the problem over a considerable time span, neglected to deal in a timely manner with issues uncovered in on-site inspections, and did not comply with the Financial Supervision Authority’s instructions to the extent required.
The Estonian financial watchdog eventually submitted an official application on February 8 to withdraw the authorization of Versobank.
“As financial intermediaries are one of the first and most important lines of defense in the fight against money laundering and the financing of terrorism, we cannot tolerate their breaching of the law in any way. The withdrawal of the authorization of Versobank is a clear signal,” Kilvar Kessler, chairman of the management board of the Financial Supervision Authority, said.
Kessler confirmed that Versobank was an isolated case, and that the case did not concern any other credit institutions operating in Estonia.
“Versobank AS has 5,600 clients, of whom only 2,000 are residents of Estonia, and it is one of the smallest credit institutions operating on the Estonian market, meaning that its closure will not have any negative impact on the future operation of the Estonian financial system,” he said, adding that Versobank had sufficient funds to cover the claims of depositors.
The long-time CEO of the bank, Riho Rasmann, is believed to have left his position as chief executive in January 2017 due to incidents of money laundering that took place in the bank in the course of which more than EUR 205 million of dirty money flowed through the bank’s accounts between 2013 and 2014.
Aivo Adamson, the former director general of the Estonian Road Administration and CEO of Starman, replaced Rasmann. The new management board includes manager of the Estonian business unit Sofia Kirsimaa, financial director Siiri Heinsaar, and head of risk management Urmas Somelar.
Latvia’s Financial and Capital Market Commission ordered Versobank in September 2016 to terminate its Latvian business, but in late July 2017 the bank and the commission reached an agreement, which enabled the Versobank to continue offering its services on the Latvian market.
Versobank has been operating in Estonia since 1999. According to unaudited figures, Versobank’s assets in 2017 grew to EUR 294 million, and net profit totaled EUR 300,000. (ERR/Business World Magazine)