FCMC and JSC “BlueOrange Bank” have entered into an administrative agreement, a fine of 1.2 million euro imposed
The Financial and Capital Market Commission (hereinafter – FCMC) and JSC “BlueOrange Bank” (hereinafter – the Bank) have entered into an administrative agreement on setting legal obligations under the scope of the Law on the Prevention of Money Laundering and Terrorism Financing (AML law) in order to improve the functioning of the Bank’s internal control system. The agreement provides for a fine of 1 246 798 euro on the Bank.
By signing the agreement the FCMC and the Bank have agreed on a settlement in order to terminate the administrative proceedings initiated by the FCMC regarding violations detected in the 2016 and 2017 inspections, i.e. the Bank had failed to comply with the provisions of the AML law and FCMC regulatory requirements, for example, had not paid sufficient and special attention to inter-related transactions with no apparent economic purpose, and had not ensured timely and high-quality customer due diligence and the documentation of results thereof, as well as had failed to provide for suspicious transaction detection and timely reporting them to the Control Service. The FCMC is of the opinion that violations committed by the Bank are considered as serious; besides, the Bank has previously been punished for breaches in the AML area.
FCMC Chairman Pēters Putniņš: “This year, reducing risks has been a priority in the banking supervision. Since the beginning of the year, the situation in the Latvian banking sector has dramatically changed, this is demonstrated by a decrease in high-risk customers’ deposits in our banks. Transformation of existing business practices must also be continued to achieve a really convincing level of control, thus we will ensure that the country’s overall risk levels are reduced in this field.”
Pursuant to the agreement the parties have agreed to the follow-up measures for enhancing the AML/TF internal control system that the Bank undertakes to fully meet within the set time-limits. Whereas the FCMC will monitor the compliance of the Bank with the agreed commitments within the deadlines and to the extent specified in the agreement
The maximum fine for such irregularities is 10% of the Bank’s total annual turnover, which would be a fine of EUR 3 694 216. In determining the fine on the Bank the FCMC took into account that the Bank at its own initiative had developed an action plan on addressing the detected deficiencies and at the moment of entering into the agreement it had fulfilled the tasks specified in the agreement, as well as submitted detail information on the already made and planned investments in the IT systems and technology, and improvement of employees’ qualifications. Besides, it should be noted that when entering into the administrative agreement the amount of the fine is always reduced by 50%. Having regard to the determination by the Bank to take measures to enhance its internal control system, cooperation, as well as comparing the size of the fine with those applied to other credit institutions for similar violations (in terms of types, size, severity), and in view that the Bank is planning to make additional investment in the AML/TF management in 2019, the fine applied to the Bank by the FCMC has been reduced to 1 246 798 euro.
Sanctions imposed by the FCMC on the financial sector in the compliance control field
In 2018, the FKTK imposed sanctions for violations of the AML law on six participants of the Latvian financial sector – three banks, two e-money institutions and one payment institution, total more than 4 million euro (or 4 013 877 euro). Information on the sanctions applied by the FCMC (made individually public since 2014) is available at: http://www.fktk.lv/attachments/article/7398/SANKCIJU_SARAKSTS_EN_2018.pdf
Since the changes of the AML/TF regime in the international financial environment along with the reforms to the Latvian banking sector taken by the FCMC over the past four years, various sanctions for the breaches of AML law have been applied to the financial sector entities, including the fines in the amount of approximately 16 million euro:
In the European Union (EU) there is a common approach to the application of penalties for the AML/TF regime violations. At present, the maximum fine per institution in the AML/TF area may be up to 10% of annual turnover, or 5 million euro in case the 10% are less than 5 million euro. The FCMC imposes penalties on an individual basis, evaluating attitude of the institution, seriousness of breaches, as well as the improvements the institution is planning to implement. The penalty size applied to financial institutions in Latvia is comparative (as a percentage) with the penalties imposed on the financial institutions abroad. The comparison against the final amount is not correct because the turnover of Latvian financial institutions and their volume of assets are significantly lower than the EU average.
Financial and Capital Market Commission
Phone: +371 67774808, +371 67774807