The US Treasury Department took the severe step of proposing to ban Latvia’s third-biggest bank from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program.
Financial institutions in the US would be barred from maintaining correspondent accounts for ABLV Bank AS, effectively ending its ability to transact in US dollars, according to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN. ABLV had allowed transactions on behalf of blacklisted entities tied to North Korea’s effort to develop nuclear weapons, as well as corruption in Russia and the Ukraine, the department said.
“ABLV has institutionalised money laundering as a pillar of the bank’s business practices,” Sigal Mandelker, the Treasury Department’s undersecretary for terrorism and financial intelligence, said in a speech to compliance executives at a conference in New York. “We are resolved to use our economic authorities to take action against foreign banks that disregard anti-money-laundering safeguards and become conduits for widespread illicit activity.”
The US Treasury relied on “unfounded and misleading information” in reaching its findings and didn’t take into account advances ABLV has made to prevent money laundering and terrorism financing, the bank said in a statement posted on its website. The bank “shall make every care to rebut this outrageous defamatory information,” it said.
ABLV has 60 days to submit written objections to the finding. US Treasury Secretary Steven Mnuchin has the final say on the imposition of the ban. Latvia’s bank regulator said it’s cooperating with the European Central Bank, which directly supervises ABLV, and called on the bank to actively communicate with its clients.
ABLV is the 18th financial institution to be designated as a primary money-laundering concern by the Treasury Department since a law giving it authority to do so was passed in 2001. The most recent designation before ABLV was China’s Bank of Dandong in July. It was named for allegedly providing a gateway for North Korea to access the US and international financial systems.
The US made broad-based allegations about ABLV’s lack of anti-money-laundering controls and highlighted its recent transactions on behalf of entities related to North Korea. “ABLV facilitated transactions related to North Korea after the bank’s summer 2017 announcement of a North Korea ‘No Tolerance’ policy,” FinCEN wrote in a notice of
GLOBAL BANK PULLBACK
As global banks have cut international services amid tighter regulations, steeper fines and declining profitability, Latvian banks as a group have seen access to the US dollar tighten. JPMorgan Chase and Co. ceased offering dollar-clearing services in 2013 and Deutsche Bank stopped dealing with Latvian lenders last year. As a result, banks like ABLV have had to rely on other institutions that have accounts with New York-based lenders to transfer US dollars. Latvia’s banking regulator has also imposed tighter rules, record fines and annual checks for those working with foreign clients as part of an effort to shake off a reputation that the country’s institutions hold wealth with questionable origins.