Minister: it is possible for banks to reduce number of risky clients to5%
It is not impossible for Latvian banks to reduce the number of risky clients to 5%, says Finance Minister Dana Reizniece-Ozola.
She says that Finance and Capital Market Commission (FCMC) has met with representatives of all banks working in Latvia. The regulator gave them two weeks to decide what each bank intends to do with their business and how they will perform restructuring. «FCMC’s proposal is prohibiting so-called shell companies to naturally reduce the number of risky clients. Banks have to reduce the number of such clients to 5% in a couple of months,» said the minister.
According to Reizniece-Ozola, such a reduction will be hard to achieve for banks. Still, it is not impossible. Information from FCMC shows that among clients of Latvian banks are 26,081 shell companies. Two of them are located in Latvia. The proportion of shell companies in all Latvian banks is 36.57%. In the foreign clients segment, shell companies’ proportion is 44.5%.
In total, Latvian banks have 2.6 million clients.
This data includes ABLV Bank, whose shareholders have decided to commence the bank’s self-liquidation.
Problems for ABLV Bank started when Financial Crimes Enforcement Network (FinCEN) of US Department of Treasury announced in the middle of February that it plans to establish sanctions against ABLV Bank for money laundering activities that had assisted with North Korea’s nuclear arms programme, as well as illegal activities in Azerbaijan, Russia and Ukraine.
The report published by FinCEN details that until 2017 the management of ABLV Bank had been using bribery to influence officials in Latvia in an attempt to avoid legal action and threats to its highrisk operations.
FinCEN also mentioned that ABLV Bank’s business practice provided financial services to clients who wanted to avoid regulator’s attention – the bank’s management and employees are equally to blame for illegal financial activities of their clients, including money laundering through shell companies.
ABLV Bank denies all accusations from FinCEN.
Latvian Commercial Banks Association has announced that it fully supports limitation of shell companies’ presence in the banking sector.