The OECD drive
One of the reasons the parliament committee called in the regulator to the hearing was an OECD experts report on the accomplishments of Latvia in combatting bribery, including laundering the proceeds of it. “Latvia has significant exposure to corruption and foreign bribery-related money laundering due to a high proportion of non-resident clients in the banking sector,” the report said. Both the bribery case of Kyrgyz officials, including the President, who received money from a Canadian company via an unnamed Latvian bank, and the case of bribing Russian officials with the help of a German intermediary and Latvian banks, admitted by Hewlett-Packard, were mentioned.
The OECD concluded that the existing supervision system has failed to detect several large-scale laundering transactions and instead has found out about them from the press. The penalties imposed have been disproportionately small, the legal requirements for banks – insufficient, inspections – too few and far between, and the supervisor: weak.
In an interview with Re:Baltica Zakulis disagreed and quoted the Council of Europe Moneyval assessment, which concludes that institutionally and regulation-wise Latvia has done what’s necessary to prevent money laundering. He mentioned sending a permanent FCMC advisor to the U.S., tasked with maintaining communication between both countries. Arnis Lagzdiņš, the man appointed for that job, was touted to the press as well-educated and experienced ex-World Bank employee. It was not mentioned that Lagzdiņš was also the vice president of Parex Banka, a bank whose collapse in 2008 pushed the government to seek an IMF loan, but before was the crown jewel of the non-residential banking.
FCMC, feeling the heat, announced harsh sanctions just two working days before the impending critical meeting at parliament: a two million euro fine for Privatbank, a demand to change the bank’s board, and individual fines for the board members.
The next act of the same play involved the State Police. A couple of days later the police reported apprehending two employees of Trasta komercbanka (TKB) for possible laundering in another case.
However, both the report and the experts interviewed by Re:Baltica confirm that the problem is not in the laws of Latvia, but in the unusually pliable attitude of the regulator and law enforcement personnel. The average police officer or an unspecialized prosecutor, whose best understanding of a financial scheme is making ends meet before payday, has no hope – or desire – to figure out schemes conjured by dozens of lawyers and consultant offices.
Next Page 5