Latvia’s Financial and Capital Market Commission (FCMC) is set to levy a fine of 5.85 million euros ($6.94m) on the commercial bank Rietumu Banka for violations of AML/CFT regulations. The bank must also fulfil the legal obligations of addressing all the violations and issues that the FCMC identified.
The FCMC conducted an onsite inspection of Rietumu Banka in 2019, followed by targeted AML/CFT inspections in 2019 and 2020. It also evaluated the compliance of the bank with AML/CFT regulations and checked if the bank had in place an internal risk assessment and management system. The FCMC’s inspections revealed the bank’s deficient and inadequate internal control system for AML/CFT risk management. The Commission also found that the bank’s risk assessment for payment service providers (even foreign providers) was poor. There were even cases where Rietumu Banka assessed a lower ML/TF customer risk than the actual risk level.
The bank’s ML/TF risk management resources were also inadequate. It also failed to conduct comprehensive internal audit service inspections. The FCMC further noted deficiencies in the bank’s internal AML/CFT regulatory framework and customer due diligence quality control. Such deficiencies in the AML/CFT framework led to significant irregularities in customer due diligence, customer transaction monitoring, documentation of findings, identification of the source of funds, identification of beneficial owners, identification of shell corporations, and reporting to Latvia’s Financial Intelligence Service.
In light of the above-mentioned deficiencies, the FCMC has ordered Rietumu Banka to create an action plan to promptly address the irregularities and update its business model to reduce the risk exposure of high-risk jurisdictions. The FCMC also requires the bank to audit high-risk customers and hire third-party auditors to evaluate its compliance with AML/CFT regulations.