FCMC applies a fine of 1 million euro to JSC “PrivatBank” and imposes a number of legal obligations

18.09.2019
  • Section:
The Board of the Financial and Capital Market Commission (FCMC) on 13.09.2019 decided to impose a fine of 1 019 319 euro on JSC "PrivatBank" (hereinafter – the Bank) for violation of the regulatory requirements for the prevention of money laundering and terrorism and proliferation financing. The Bank is also subject to a number of legal obligations, including the submission to the FCMC, within the specified timeframe, an action plan for addressing breaches and shortcomings identified and carrying out an independent review of internal control system.

The FCMC carried out an on-site inspection of the Bank, during which the FCMC identified a number of breaches concerning the Bank’s internal control system, customer base risks and their management. The violations indicate serious shortcomings in the Bank’s internal control system in the area of prevention of money laundering and terrorism and proliferation financing, as they have been detected in the key elements of customer due diligence and transaction monitoring. The Bank had not established an adequate internal control system to meet its risks in the field of prevention of money laundering and terrorism and proliferation financing, which would ensure effective compliance with the regulatory requirements such as:

  • The activities of the Bank’s committee in charge of the prevention of money laundering and terrorism and proliferation financing were ineffective, did not ensure the implementation of measures for mitigation of money laundering and terrorism and proliferation risks, as well as the individual decisions taken were favourable to individual shareholders of the Bank;
  • the Bank’s internal control system did not ensure the continuity of customer due diligence throughout the customer’s life period;
  • the Bank had not taken adequate measures to make certain that a beneficial owner indicated was the beneficial owner;
  • in several cases, the Bank had not obtained documentation and had not taken necessary measures to make certain of the origin of financial means in its customer accounts and had not documented findings;
  • the Bank had failed to provide timely and high-quality customer due diligence and documentation of results, as well as judgements in customer cases were incomplete;
  • the Bank had not duly decided on termination of their business relationship with customers.

In view of above, it is concluded that the Bank has not ensured the effective functioning of the internal control system in the field of the prevention of money laundering and terrorism and proliferation financing in a way that its activities comply with the regulatory requirements for the prevention of money laundering and terrorism and proliferation financing; moreover, the breaches are considered as essential and sustainable. At the same time, the FCMC takes into account the progress made by the Bank in addressing shortcomings identified by the FCMC.

In accordance with the FCMC’s decision, the Bank has to submit to the FCMC a plan of the measures to carry out the legal obligations imposed and to address the irregularities and shortcomings identified and to take the measures provided for in the plan within the specified time limits in order to prevent further irregularities of a similar nature in the internal control system in the field of money laundering and terrorism and proliferation financing risks management. Besides, an independent assessment of the appropriateness and effectiveness of the Bank’s internal control should be carried out involving a sworn auditor or a commercial company of sworn auditors.

The amount of the fine imposed on the Bank shall be 90% of the maximum statutory amount, 10% of the Bank’s total annual turnover. The fine specified for the Bank shall be paid into the State budget within one month from the date of entry into force of this administrative act.

 

Further information:
Communications Division
Financial and Capital market Commission

Phone: +371 67774808,+371 67774807
dace.jansone@fktk.lv

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