The U.S. Treasury Department took the severe step Tuesday 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.
ABLV has 60 days to submit written objections to the finding. U.S. 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 U.S. and international financial systems.
The U.S. 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 proposed rulemaking.
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 U.S. 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 U.S. 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.
The tighter dollar-clearing services have coincided with a series of money-laundering allegations. The Latvian regulator fined three banks a total of 5.5 million euros ($6.8 million) for handling accounts that were involved in a $1 billion Moldovan fraud in 2014, equivalent to about an eighth of that nation’s economic output at the time.
Five Latvian banks agreed last year to fines totaling 3.5 million euros for failing to perform adequate due diligence and gather sufficient information on transactions and beneficiaries of deals linked to North Korea.
ABLV, like the rest of the bank sector that primarily serves foreigners, has lost deposits due to the stricter enforcement regime.
The Latvian lender opened a subsidiary in Luxembourg in 2012, and ABLV Advisory Services opened an office in the U.S. in 2016. It also has representative offices in Moscow, St. Petersburg, Russia; Kiev, Ukraine; Odessa, Ukraine; central Asia, and Hong Kong.