Regulators escalate standoff with scandalous Latvian bank

EPA/VALDA KALNINA

Latvia's Central Bank building in Riga, Latvia

But, is this the tip of the iceberg?


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Latvia’s 12th largest bank, Trasta Komercbanka, could be heading towards a bail-in. The Baltic state’s financial regulator is  the bank’s management with failure to address allegations of money-laundering.

Latvia’s Financial and Capital Market Commission (FCMC) restricted the activities of the joint stock company “TRASTA KOMERCBANKA”, forbidding it from performing debit transactions in any currency, including through online banking, ATMs and by cash, with clients in the amount that exceeds 100 000 euro per depositor, that is, equal to the amount guaranteed by the EU.

The announcement came on Friday, just before the end of the working day. The regulator’s chairman, Kristaps Zakulis, suggests the bank and its largest shareholders had been given ample warning of the need to address money laundering allegations. “The Bank has not managed to do it within a reasonable timeframe, therefore the regulator is compelled to take the next step and make use of instruments laid down in the Credit Institution Law – in this case to impose restrictions on the activities of the bank,” said  Zakulis.

One of the first to suffer from this escalation could be Dexia, a Franco-Belgian bank. Thus far the FCMC had issued warnings to the bank’s largest shareholders possessing a qualifying holding, Igors Buimisters and Ivan Fursin, regarding their failure to fulfill statutory obligation of shareholder having a qualifying holding under the Credit Institution Law. However, this does not mean that Dexia is safe. In December, 2015 a Belgian Court requested a probe on Trasta Komercbanka, to investigate stealing €1.7 million euros from customer accounts of the French-Belgian Dexia, according to De Standaard. The theft was committed by a group of hackers from Russia and Ukraine in 2008 – 2009. And the money was transferred to an account at Trasta Komercbanka.

Trasta Komercbanka has also been linked with the infamous Russian “Laundromat” scandal, that is, a money-laundering mechanism for $20 billion stolen by corrupt politicians and organized crime groups in the CIS region. The Latvian bank, along with one Moldovan and 19 Russian financial institutions was according to the Organized Crime and Corruption Reporting Project (OCCRP) instrumental to Russian and Ukrainian oligarchs.

Latvian so-called boutique banks, like Trasta Komercbanka, featured prominently during Cypriot capital controls, trying to lure non-resident depositors from Russia, Ukraine and other CIS countries to whom they traditionally cater. As the Financial Times noted at the time, the Latvian banking system went from a 2% negative deposit growth in 2010 to a 32% increase by the end of 2012. The increase was mostly due to the “reduction in attractiveness” of some rival non-resident banking systems, like Cyprus.

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