FCMC imposes a fine and legal obligations on AS “Rietumu Banka”

In 2019, the FCMC carried out an onsite inspection of AS “Rietumu Banka”, and in 2019 and 2020 – targeted inspections in the field of AML/CTPF, assessing compliance of the bank with the AML/CTPF regulatory requirements, as well as whether there was an internal control system in place capable of identifying risks to enable the bank to take further measures necessary to manage risks, thereby preventing the use of the bank and Latvia’s financial system for ML/TPF purposes.

During the inspections, the FCMC identified irregularities and deficiencies related to insufficiently effective bank’s internal control system and risk management, as well as came to the conclusion that the bank had not adequately assessed the risks associated with the activities of payment service providers (including foreign) and, in some cases,  the level of ML/TPF risk inherent to the customer was determined lower than the actual risk level.

The inspection revealed that insufficient resources were available in the bank for the ML/TPF risk management, as well as there had been a lack of comprehensive internal audit service inspections, incomplete internal regulatory framework in the field of AML/CTPF and lack of customer due diligence quality control. These had been the causes of significant irregularities in several customer due diligence and transaction monitoring processes, such as carrying out timely and high-quality customer due diligence, including enhanced due diligence and documentation of its findings, identification of the origin of financial funds, ensuring sufficient customer transaction monitoring, identification of beneficial owners and reporting timely to the Financial Intelligence Service, identification of shell corporations.

The FCMC has imposed a number of obligations on the bank to address identified violations and shortcomings, namely:

• to develop an action plan to immediately address the irregularities identified in the inspections and continue work on changing the business model and reducing risk exposure rates of high-risk jurisdictions;
• to review the customer’s risk assessment scoring system and to carry out audits of customer base with increased ML/TPF risk;
• to perform an independent assessment of the effectiveness and compliance of the bank’s internal control system with the AML/CTPF regulatory requirements by the involvement of sworn auditors or commercial company of sworn auditors;
• after carrying out an assessment the bank should develop measures to comply with the recommendations of independent assessment;
• to comply with restrictions on attracting new high-risk customers of particular categories until the identified shortcomings have been rectified.

The FCMC draws attention to the fact that the amount of the fine is set as a percentage taking into account the total annual turnover of the bank.

Information updated on 03.06.2022

Based on the contestation submission by AS Rietumu Banka, the FCMC repeatedly heard the arguments of AS Rietumu Banka, assessed the legal and actual circumstances, as well as progress in addressing infringements. Considering conclusions of the assessment, on 31.05.2022 the FCMC decided to reduce the fine by EUR 585.6 thousand, leaving the rest of decision unchanged, thereby partially satisfying requests of AS Rietumu Banka. The previous amount of fine has been reduced in view of the investment made and planned by the Bank for improvements to the internal control system.

For further information:
Dace Jansone
Head of Communications and Financial Literacy Division
Financial and Capital Market Commission
Phone: +371 67774808
E-mail: dace.jansone@fktk.lv