- U.S., OECD want harsher punishments for money launderers
- Local lawmakers are demanding the watchdog bolster oversight
The head of Latvia’s banking regulator resigned weeks after lawmakers revealed that the U.S. is seeking stricter supervision of transactions from the former Soviet Union following a string of money-laundering scandals.
Kristaps Zakulis, who’ll stay in his post until a replacement is chosen, said Monday in an e-mailed statement that his departure will reduce “suspicions, rumors and the shadow of doubt” with regard to the Financial and Capital Market Commission. He was appointed in 2012.
Latvia, a magnet for cash from the former Soviet Union that’s been racked by years of money-laundering scandals, is facing growing pressure to improve oversight of its banks from U.S. officials and the Organization for Economic Cooperation and Development. Banks in the Baltic country of 2 million people, a European Union and euro-region member, have become embroiled in scandals that include bribes by a Scandinavian telecommunications company, a Russian tax fraud and the theft of $1 billion from Moldova.
“The feeling is that the regulator only starts to react when news of violations becomes public,” Karlis Sadurskis, head of the Latvian parliament’s budget and finance committee, said by phone in December. U.S. officials have said “very clearly that there’s a problem.”
U.S. congresswoman Sheila Jackson Lee this month called for probes into thefts from national banks in the former Soviet Union, saying a “large portion” of the money in the Moldovan case may have ended up in Latvia. An October report by the OECD found numerous weaknesses in banking supervision and enforcement. While pursuit of offenders has increased recently, the OECD said fines are too small to act as a deterrent, and has long complained of weak checks on questionable clients.
The criticism prompted lawmakers to angrily question the banking watchdog in December, demanding quarterly updates and tougher action. That month, the regulator fined Privatbank AS’s Latvian unit a record 2 million euros ($2.2 million) for handling some of the money from the Moldovan fraud, far eclipsing its previous record penalty of about 143,000 euros. The bank denies wrongdoing.
On Friday, the regulator also limited debit operations to 100,000 euros at Trasta Komercbanka AS. The Organized Crime and Corruption Reporting Project said in 2014 that Trasta was involved in the transfer of as much as $20 billion in illicit cash from Russia to Latvia. The lender strictly followed all laws, spokeswoman Marina Lebedeva said at the time, declining to comment further, citing legal restrictions.
Latvian officials discussed banking supervision at two meetings of the National Security Council, TV3 reported Sunday evening. It said unidentified U.S. officials had asked for a change in leadership at the regulator, without saying where it got the information.