ABLV Bank announced the resignation of its chief compliance officer, Aleksandrs Paže, at a time when the bank finds itself in hot water for alleged money laundering.

“My decision is based on the statement of the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) released on 13 February regarding ABLV Bank,” Paže said. “I am confident that my work in the field of prevention of money laundering and terrorism financing and in the field of controlling fulfilment of sanctions has always been in compliance with the provisions of the law and international best practices.”

“ABLV Bank has done tremendous work to comply with all international regulations and requirements regarding this issue,” Paže added. “Given the complicated situation and the need to create maximally favorable conditions for the stabilization of the bank’s operation, from the point of view of good corporate governance and ethics, right now, I believe I cannot continue performing my duties as a member of the board, so I am asking to accept my resignation as a member of the board.”  

Paže’s statement refers to a finding and notice of proposed rulemaking (NPRM) issued by FinCEN on Feb 13, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank. FinCEN said it is proposing this action “based on its finding set out in the NPRM that ABLV is a foreign bank of primary money laundering concern.”

As described in the finding, ABLV institutionalized money laundering as a pillar of the bank’s business practices. According to FinCEN, ABLV’s management permits the bank and its employees to orchestrate money laundering schemes; solicits high-risk shell company activity that enables the bank and its customers to launder funds; maintains inadequate controls over high-risk shell company accounts; and seeks to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules to protect these business practices.

“ABLV’s failure to implement, and disregard for, effective AML/CFT and sanctions policies and procedures have made the bank attractive to a range of illicit actors engaged in organized crime, weapons proliferation, corruption, and sanctions evasion,” FinCEN stated. “Illicit financial activity at the bank includes transactions for parties connected to UN-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles.”

In addition, ABLV has facilitated transactions for corrupt politically exposed persons and has funneled billions of dollars in public corruption and asset stripping proceeds through shell company accounts. ABLV failed to mitigate the risk stemming from these accounts, which involved large-scale illicit activity connected to Azerbaijan, Russia, and Ukraine.

“FinCEN will continue to take action against foreign banks that disregard anti-money laundering safeguards and become conduits for widespread illicit activity,” Steven Mnuchin, Secretary of the Treasury, said in a statement. “Deficient practices at banks foster a wide array of illicit conduct, including activity linked to North Korea’s weapons program and corruption connected to Russia and Ukraine. FinCEN is committed to protecting the U.S. financial system from these types of risks.”

On Feb. 18, the Financial and Capital Market Commission (FCMC), Latvia's financial sector regulator, imposed restrictions on payments by ABLV Bank, AS, “prohibiting debit operations in all currencies in the accounts of Bank customers.” This decision follows instructions made by the European Central Bank. “The bank must ensure that entry of the customer payment orders into the bank’s system is suspended, as well as debit transactions are not executed with a value date as of midnight 19 February 2018,” the FCMC stated.

Finance Ministry response

On Feb. 22, the Ministry of Finance issued a statement regarding the situation with ABLV Bank. The Ministry of Finance; the FCMC; and the European Central Bank (ECB), in collaboration with the Bank of Latvia, are “professionally working in 24/7 mode to control the situation,” the Finance Ministry stated.

In recent years, the Finance Ministry, in collaboration with the Association of Latvian Commercial Banks, the FCMC, and other institutions, have “considerably strengthened” the legal framework of AML/CFT, ensuring the FCMC mechanisms for effective implementation of the supervisory process, the Finance Ministry stated. “The sanctions for violations set for the credit institutions have been strengthened, as well.”

According to the Finance Ministry, the Treasury Department’s notice “contains new facts, which were forwarded for due action to the law enforcement authorities.” The Finance Ministry added that it expects “urgent and unsparing response” regarding the facts referred to in the notice.

The Finance Ministry added that FinCEN’s notice affects the operation of ABLV Bank, “because…the possibilities of the bank to obtain liquid funds within the standard term were encumbered,” and that the bank’s supervisor, the ECB has given ABLV Bank time to resolve this situation by setting restrictions on the outgoing payments.

Additionally, ABLV Bank, for its part, is actively working to present the plan for further development to the supervising institutions, ECB and the FCMC. The FCMC maintains constant contacts with the ECB and provides regular information updates to all competent institutions about the situation in the bank. Since the Treasury Department’s notice, ABLV Bank’s activities are under elevated control, involving the ECB governors.

Lastly, the Finance Ministry said it “can confirm that the State budget funds will not be invested into ABLV Bank.”

ABLV response

On Feb. 23, ABLV Bank also issued a statement, saying that the Luxembourg District Court postponed for a second time a hearing relating to a request by the Commission de Surveillance du Secteur Financier to suspend the debit operations of the ABLV Bank Luxembourg clients “to protect the bank and stabilize the situation.” That hearing has been postponed until Feb. 28.

The bank emphasized that ABLV Bank Luxembourg is “currently able to meet all of its obligations toward clients. The liquidity of the Luxembourg bank fully covers the amount of its clients’ deposits. The bank is able to reimburse its liabilities towards all of its clients. However, some key Luxembourg counterparties have decided to block ABLV Bank Luxembourg USD accounts.”

Concerning FinCEN’s report targeting the Latvian shareholder, “ABLV Bank Luxembourg, S.A. was not accused of any wrongdoing.”