The FCMC conducted an off-site special purpose inspection of compliance with certain requirements of the Law on International Sanctions and National Sanctions of the Republic of Latvia (Sanctions Law) and FCMC’s Regulations on Sanctions Risk Management of 29.01.2019 (Regulations).
According to the findings of inspection the Bank had failed to fulfil obligations under the Sanctions Law and Regulations – to carry out and document the assessment of international and national sanctions risk within the specified timeframe. The FCMC draws attention to the fact that performing the assessment is causally linked to the development of internal control system for the management of the sanctions risk since it is necessary to ascertain the risks of international and national sanctions inherent in the bank’s operation in order to develop an effective system for risk management. Assessing the consequences of the violation, the FCMC also took into account that no sanctions infringement had been identified.
Pursuant to the FCMC’s penalty policy the imposition of fines is envisaged for substantial infringements of short duration. However, the FCMC has taken into account the circumstances that the European Central Bank by its decision of 15.08.2019 assessed the Bank as failing or likely to fail, the European Single Resolution Board decided that resolution of the Bank was not necessary and the provision of financial services by the Bank was suspended. In FCMC’s view in such circumstances it would be commensurate, appropriate and proportionate to establish the fact of infringement without imposing a fine and corrective measures on the Bank, taking into account the financial situation and the expected winding up of the Bank. In view of above, having found the infringement, the FCMC applied the legal instruments which would be possibly less restrictive, but at the same time they would ensure that the Bank and third parties were aware that the irregularities found in the activities of the Bank would not be tolerated and would be punishable.
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