The Board of the Financial and Capital Market Commission (FCMC) adopted a decision to apply fines to the joint stock company “Baltic International Bank” and Ilona Guļčaka, the Chair of the Board, in the amount of EUR 1 100 000 and EUR 25 000, respectively. During inspections of “Baltic International Bank” the FCMC had identified repeated violations of the provisions of the Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing (AML/CTF) and Regulations on Customer Due Diligence, getting involved in transactions that subject the bank to material money laundering and reputational risks.
The bank had failed to pay particular attention to complex, mutually linked transactions performed by customers, had not identified the origin of funding and timely detected suspicious rolling spot forex transaction schemes.
In view that the bank’s activities are focused on foreign markets that may likely subject them to the increased money laundering and terrorist financing risks, the FCMC emphasizes the significance of providing adequate customer due diligence, supervision and efficient internal control system.
Assessing responsibility of the chairperson of “Baltic International Bank’s” Board, Ilona Guļčaka, the FCMC took into consideration that in the period from 2003-2015 she had been responsible for the AML/CFT issues and had failed to take appropriate and timely measures to prevent involvement of the bank in suspicious transactions, and as a result the bank was exposed to money laundering and reputational risks.
In deciding on applying the sanctions to the bank, FCMC took into consideration that currently the bank meets all the regulatory requirements, as well as has expressed commitment to upgrade its internal control system, therefore the FCMC decided not to impose the maximum possible penalty but a fine of EUR 1 100 000. Under the Credit Institution Law provisions, the FCMC may impose a fine of 10% of net revenue of the previous financial year.
In deciding on the amount of the fine for the bank’s Board Chair Ilona Guļčaka, the FCMC took into consideration that she had recognised that the bank’s internal control system had been inadequate and was resolved to work on upgrading it, including training of the staff in recognition of suspicious transactions to ensure that such violations do not occur further. In accordance with the Credit Institution Law, FCMC may apply a fine for violations committed by a natural person in the amount of 50%-100% of the net revenue of the previous year. However, the FCMC may decide on a reduction in the amount of fine if a market participant has voluntarily eliminated the consequences prior to the decision on the findings is adopted by the FCMC Board. Consequently, the fine of EUR 25 000 is applied to Guļčaka instead of a maximum penalty.
Moreover, a number of legal obligations are set for the bank and its board: to assess its internal control system and take the necessary measures for improvements and raising efficiency; to perform an independent assessment of the internal control system in the area of money laundering and financing terrorism, drawing on a company with required knowledge and experience in the US compliance assessment framework; to perform audit of the bank’s customer base and decide on termination business relations with customers whose activities result in exposing the bank to inadequately high reputational and money laundering risks.
This decision may be disputed at the FCMC or appealed to the Regional Administrative Court within a month of its announcement to the addressee.
FCMC Communications Division
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