FCMC imposes a fine on JSC „Reģionālā investīciju banka”
The Board of Financial and Capital Market Commission decided to apply sanctions on JSC „Reģionālā investīciju banka”, imposing a fine of 70 000 euro for weaknesses identified during an inspection in the bank regarding the customer (non-resident) due diligence and monitoring of transactions. The collected fine is to be assigned to the State budget.
According to the Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing (Latvian AML/CFT Law) and the Regulations for Enhanced Customer Due Diligence financial institutions have certain duties and obligations regarding the procedures of performing customer due diligence. Therefore when detecting certain risk characteristics a bank must evaluate compliance of transactions in the customer account with indicated business activities, ascertain the origin of customer funds and analyse business activities, as well as make certain of beneficial owner – whether the beneficial owner indicated by the customer in fact is real beneficiary and is benefiting from the activities of company. This is a statutory obligation the banks must observe not only when commencing the business with their customers but throughout their business relationships. After adequately evaluating suspicious transactions, in certain cases the bank is obliged to refrain from carrying out the customer transaction and report it to the Office for the Prevention of Laundering of Proceeds Derived from Criminal Activity (Financial Intelligence Unit).
The amount of the fine was determined based on the provisions of the Credit Institution Law in effect at the moment of violation, according to which the maximum penalty would be 142 300 euro, having regard of the legal principle that the law cannot be applied with retroactive effect. It should be mentioned that on 28 May 2014 amendments to the Credit Institution Law came into force, which provide a new procedure for application of penalties to credit institutions. FCMC has the power to impose a fine up to 10% of total net income of the previous year.
The bank has the right to dispute the FCMC decision to the Regional Administrative Court in one month.
FCMC performs regular scheduled inspections of banks, as well as unscheduled spot checks upon receiving information about likely involvement of Latvian bank customers in money laundering or an attempt thereof. The purpose of inspections is to ascertain whether the banks conform to the requirements of the Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing (Latvian AML/CFT Law) and other binding regulatory provisions, and to evaluate the quality and efficiency of their internal control systems to prevent any possibility of using the bank accounts to launder money.
In the discharge of its supervisory functions, FCMC monitors ongoing enhancement of bank internal control systems in accordance with international standards, EU directives and good practice requirements for the purpose to prevent any possibility to make use of the Latvian financial system for money laundering. In case of identifying any unusual or suspicious transaction, the banks and other persons have a duty to report the unusual or suspicious transactions to the Financial Intelligence Unit.
Procedure for disclosure of FCMC sanctions
From 2014, FCMC has determined new procedures for disclosure of information on the sanctions applied by FCMC to the banks to ensure greater transparency of decisions made during the supervision process. Before, only summarized information on anonymous basis was available regarding the sanctions imposed by FCMC, without identifying certain market operators because of the status of restricted access information.
In accordance with Section 196 of the Credit Institution Law following sanctions may be applied to the bank: a warning made by FCMC, a fine, temporary bans for breaches of a responsible person to perform certain duties, cancellation of licence or other additional sanctions, for example, for serious violations in the fields of anti-money laundering and anti-terrorist financing, etc. In the future, FCMC will also disclose information on the sanctions appealed to the court by the market participants, providing the customer and the public with more details about the supervisory decisions. In addition to information on the sanctions applied, FCMC will also make public supervisory actions, including the measures taken by the regulator to prevent above violation.
Head of Communications Division
Financial and Capital Market Commission
T: +371 67774860
M: +371 26148001