FCMC imposes an obligation on AS “PrivatBank” to improve risk management culture and internal control system, applies a fine

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Following inspections carried out in 2020, the Financial and Capital Market Commission (FCMC) has concluded that AS "PrivatBank" needs to strengthen internal governance, improve its internal control system, implement and improve risk management culture corresponding to the nature of Bank's activities and ensure full-scale internal audit functioning.

The FCMC has decided to apply a fine in amount of EUR 768 653 to AS “PrivatBank” for breaches of regulatory requirements in the field of anti-money laundering and combating terrorism and proliferation financing (AML/CTPF), and a number of obligations have been imposed on the Bank to address infringements and shortcomings identified. 

The FCMC also assessed the liability of the responsible officials for the infringements identified during the inspection, as a result a warning was issued to Inga Rumba, the former acting Chairperson of the Board of AS ”PrivatBank”.

During the inspections, the FCMC assessed internal governance and compliance with regulatory requirements in the field of the AML/CTPF, as well as compliance with the regulatory requirements regulating international and national sanctions. As it was detected during the inspections, due to an inappropriate risk management culture, AS ”PrivatBank” had not established an internal control system in the field of AML/CTPF commensurate with its operational risk that would ensure effective compliance with the requirements of the AML/CTPF Law and underlying regulatory requirements. The FCMC points out that the Bank needs to ensure independent and appropriate customer due diligence, supervision and operation of internal control system that corresponds to the Bank’s business model, customer specificities and the level of risk.

The Bank is obliged to improve its internal control system to ensure timely and comprehensive risk identification and, on this basis, the Bank should take further necessary steps to manage these risks avoiding the use of the Bank and Latvian financial system for the ML/TPF purposes.

The FCMC has imposed a number of obligations on the Bank to address infringements and shortcomings identified, such as:

  • the Bank should draw up an action plan to immediately address the shortcomings identified during the inspections;
  • under the management of an independent professional consultant, the Bank should draw up an action plan for the transformation of risk management culture;
  • by involving a sworn auditor or a commercial company of sworn auditors, an independent assessment should be carried out on the effectiveness and compliance of the internal control system of the Bank with the regulatory requirements in the field of the AML/CTPF;
  • after conducting the assessment, the Bank should develop measures for the implementation of recommendations resulting from the independent assessment.

The FCMC will follow up closely the implementation of legal obligations within the time limits.

In 2020, the FCMC introduced a new inspection approach. During inspections, 10 elements of the bank’s internal control system are assessed comprehensively (money laundering and terrorism and proliferation financing (ML/TPF) risk profile and the assessment of ML/TPF and sanctions risks; risk management strategy; structure, employee duties and qualifications, and their training; customer due diligence and transaction monitoring procedures; detection and reporting of suspicious transactions to the Financial Intelligence Unit, reporting sanctions infringements identified or potential infringements to the FCMC, including the circumvention of sanctions; IT solutions for the ML/TPF risk management; audit; agents and third-party services; whistleblowing and regulatory framework).

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


Kungu iela 1, Riga, LV-1050
6 7774800
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