On February 13, 2018, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a finding and notice of proposed rulemaking (“NPRM”), pursuant to the USA Patriot Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank, AS (“ABLV”).
Details of Allegations
ABLV is Latvia’s third biggest bank with assets of around 3.6 billion euros in September 2017. It has subsidiaries in Luxembourg and the United States, and offices in Russia, Ukraine, and Hong Kong.
FinCEN proposed the ban on the leading Latvian bank due to alleged illicit financial activity, including alleged transactions for parties connected to UN and U.S.-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles.
As described in the finding, ABLV has allegedly 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; solicit high-risk shell company activity that enables the bank and its customers to launder funds; maintain inadequate controls over high-risk shell company accounts; and seek to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules in order to protect these business practices.
Treasury Officials Focus on North Korea and Russia
Steven T. Mnuchin, U.S. Secretary of the Treasury, further alluded to the bank’s connections with sanctioned countries in his statement on FinCEN’s website, “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.”
Sigal Mandelker, the Treasury Department’s Under Secretary for Terrorism and Financial Intelligence (“TFI”), echoed FinCEN’s finding on ABLV at a Securities Industry and Financial Markets Association conference in New York on Tuesday. Mandelker said, “We are resolved to use our economic authorities to take action against foreign banks that disregard anti-money laundering safeguards and become conduits for widespread illicit activity, including activity linked to North Korea’s weapons program and corruption connected to illicit actors in Russia and Ukraine.”
In addition to describing TFI’s enforcement program as a key pillar of efforts to protect the U.S. financial system and U.S. national security, Mandelkar provided context on some of the threats the U.S. faces from North Korea, Iran, and even virtual currency.
ABLV Denies Allegations
ABLV has denied FinCEN’s allegations. In a statement issued on its website, ABLV alleged that FinCEN based its report on false information. According to ABLV, FinCEN’s report “leaves out significant information on the bank’s efforts in the field of money laundering and terrorism financing prevention in the last years.” The Bank is currently contemplating possibilities to make FinCEN reconsider its proposals.