Latvia urges deadline for Banks to end ties with Shell Companies
Latvia may ban its banks from dealing with shell companies within half a year, the latest move in a crackdown on risky practices following the closure of the Baltic nation’s No. 3 lender amid U.S. money-laundering allegations.
Already reeling from the demise of ABLV Banka AS and a scandal at the central bank, the country may see as much as 5 billion euros ($6.2 billion) in foreign deposits disappear as rules tighten, chief financial regulator Peters Putnins said Tuesday in an interview with TV channel LNT. Failure to clean up the financial industry risks worsening the issues it already faces, he said.
Latvia must act or face “isolation,” Putnins said. “And this isolation can touch other spheres — currencies and securities.”
Latvia is seeking to shield its banking system, which has traditionally served as a hub for payments and deposits from clients in the former Soviet Union, amid the ABLV situation and as central bank Governor Ilmars Rimsevics fights a corruption probe. Banks in the European Union and euro-region nation of 2 million people have repeatedly been involved in controversy, from handling money related to a $1 billion Moldovan bank fraud to handling billions of dollars of stolen cash from Russia.
U.S. pressure is playing a part. Marshall Billingslea, assistant secretary for terrorist financing at the U.S. Treasury Department, visited this month following the accusations that ABLV engaged in institutionalized money laundering and violated North Korea sanctions. The bank’s former owners deny all wrongdoing.
The clampdown may force some banks to consider shutting down, merging, shrinking or changing operations, according to Putnins, who said lenders have two weeks to submit plans to carry out the changes. The regulator’s proposal on shell companies needs government and parliamentary approval.
By Aaron Eglitis
20 March 2018