On 22 November 2024, Latvijas Banka and AS Rietumu Banka concluded an administrative agreement, thereby ending the legal dispute between both parties. AS Rietumu Banka confirms that it has fully addressed the infringements previously identified by the Financial and Capital Market Commission (FCMC) in its internal control system in the field of anti-money laundering and countering terrorism and proliferation financing (AML/CTPF) and is committed to further improving the system. In light of this, the fine previously imposed on the bank has been reduced to 1 873 556 euro.
On 15 June 2021, the FCMC decided to impose a fine of 5.85 million euro on AS Rietumu Banka for infringements of the regulatory requirements regarding AML/CTPF. The bank was also subject to a number of legal obligations to address the identified infringements and deficiencies.
In 2019, the FCMC carried out an on-site 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 these risks, thereby preventing the use of the bank and Latvia's financial system for money laundering and terrorism and proliferation financing (ML/TPF) purposes.
During the inspections, the FCMC identified infringements and deficiencies related to an 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 the ML/TPF risk inherent to the customer was determined lower than the actual risk level.
The inspection revealed that insufficient resources were available at 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 infringements 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 documenting its findings, identifying the origin of financial funds, ensuring sufficient customer transaction monitoring, identifying beneficial owners and reporting timely to the Financial Intelligence Unit, identifying shell corporations.
The FCMC imposed a number of obligations on the bank to address the identified infringements and deficiencies, namely:
- to develop an action plan to immediately address the deficiencies 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 the customer base with an increased ML/TPF risk;
- to perform an independent assessment of the effectiveness of the bank's internal control system and its compliance with the AML/CTPF regulatory requirements by involving sworn auditors or a commercial company of sworn auditors;
- after carrying out an assessment, to develop measures to comply with the recommendations of the independent assessment;
- to comply with the restrictions on attracting new high-risk customers of particular categories until the identified deficiencies had been rectified.
The FCMC drew attention to the fact that the amount of the fine was set as a percentage taking into account the bank's total annual turnover.