The Financial and Capital Market Commission (hereinafter, the FCMC), ABLV Bank, AS (hereinafter, the Bank) and Aleksandrs Pāže, its board member, have entered into a trilateral administrative agreement on determining legal relations in the application of the Credit Institution Law and Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing (hereinafter – the AML Law), aimed at improving the functioning of the Bank’s internal control system (in the areas of AML/CFT). According to the agreement, a fine of EUR 3 166 682 is to be imposed on the Bank and a reprimand to be issued to Aleksandrs Pāže, the board member responsible for the AML/CFT issues.
By signing the agreement the FCMC, the Bank and Pāže have agreed on a settlement in order to terminate the administrative proceeding initiated by the FCMC regarding violations detected in the Bank.
When determining the amount of fine applicable to the Bank, the FCMC took into account the fact that Bank currently complies with all regulatory requirements and continues improving its internal control system, as well as the Bank’s commitment to invest in the development of its internal control system the funds not less than EUR 6.5 million over the further one and a half year, therefore instead of a maximum penalty the fine of EUR 3.1 million is applied which corresponds to 2.5% of the Bank’s net income for the financial year. In accordance with the Credit Institution Law the FCMC may apply a fine of up to 10% of the bank’s net income for the previous year for violations of the AML Law committed after 28 May 2014, and it would be a larger amount than the fine applied to the Bank on that occasion.
Within the administrative proceeding, the FCMC carried out an inspection of several customers, who according to the fraud investigation conducted by the National Bank of Moldova (Kroll report), had performed transactions with the aim of gaining control in the banks of Moldova mentioned in the report in years 2012-2013.
One more inspection of other customers was also carried out, including a customer to whom the Bank had issued an unsecured loan (overdraft) in 2010, where the funds were used to create a potential threat to the interests of third parties (creditors, investors), resulting in the Bank’s exposure to incommensurably high reputational risk.
The FCMC has detected that the Bank had not ensured appropriate extent of verification and documentation of economic nature and legal purpose of particular customers’ transactions. On some occasions, the Bank had not performed initial customer due diligence before launching business relations in the extent appropriate to the level of money laundering and terrorist financing risks. Also, the Bank had failed to update information on the customer’s business activities and to perform ongoing monitoring to such an extent and quality that to make certain duly whether the transactions cannot be considered as unusual or suspicious. The Bank had not paid sufficient attention to unusually large, complex or interrelated transactions, as well as had not conducted enhanced supervision of transactions of certain customers under the customers’ due diligence.
It was ascertained that on some occasions the Bank had delayed provision of information to the FCMC and provided an inappropriate amount of information to other institutions.
Consequently, the Bank has failed to comply with the provisions of the Credit Institution Law, AML Law and the FCMC’s regulatory requirements, thus suggesting deficiencies in the Bank’s internal control system.
According to the administrative agreement the parties have agreed on the proposed further measures that the Bank committed to implement fully within the set terms in order to enhance its internal control system for the AML/CFT and to strengthen its operational efficiency. The FCMC, in turn, will monitor whether the Bank fulfils the agreed commitments within the relevant period and to the appropriate extent.
Financial and Capital Market Commission
Phone: +371 67774808, +371 67774807