Latvia’s Finance and Capital Market Commission (FKTK) has fined Rietumu Bank a total of EUR 5.85 million for violations of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing, as confirmed by FKTK.
It is the biggest fine that has been applied to a bank by FKTK so far.
In 2019, FKTK performed an inspection at Rietumu Bank, as well as additional inspections in 2019 and 2020. During those inspections FKTK looked at the bank’s compliance with the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing and its internal control system in order to prevent the possible use of the bank for purposes of money laundering and terrorism financing.
During inspections FKTK found flaws and violations related to insufficient internal control system and risk management. Additionally, experts found that the bank had not properly assessed risks related to clients. In some cases the risks of money laundering and terrorism financing were unjustifiably lowered.
During inspections it was found that the bank had allocated insufficient resources towards money laundering and terrorism financing risk management.
The bank was also found lacking a comprehensive internal audit system. Its internal guidelines for money laundering and terrorism financing prevention and customer evaluation were also found lacking.
FKTK concluded that these were causes for major violations in multiple customer evaluation and transaction monitoring processes.
FKTK has presented the bank the duty to fix the uncovered problems. Now the bank needs to develop an action plan to prevent the uncovered problems and continue working on changing its business plan and lowering risk exposure index from increased risk for different jurisdictions, as well as review the bank’s risk evaluation and client database, particularly for clients with increased risks of money laundering and terrorism financing.
Rietumu Bank is to hire a sworn auditor or an organization of sworn auditors for an independent audit of the bank’s internal control system and compliance with requirements of the aforementioned law. After the audit the bank is to develop measures for execution of recommendations provided in the independent audit.
Until the bank has prevented the flaws uncovered in the audit, the bank will remain under restrictions when it comes to attraction of new high-risk clients.
FKTK turned attention towards the fact that the volume of the monetary fine was calculated based on the bank’s annual turnover.
FKTK representative Dace Jansone confirmed that money-wise this was the biggest fine FKTK had applied to any bank so far. Jansone explained that the size of the fine was associated both with the percentage from turnover and the fact that the bank did not have an administrative contract, which could have reduced the size of the fine.
In 2016, FKTK fined ABLV Bank EUR 3,166,682, in 2018, LPB Bank EUR 2.2 million, in 2015, PrivatBank EUR 2.017 million and in 2016, Swedbank EUR 1.4 million. (BNN/Business World Magazine)