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Latvia Bank Accused of North Korea Links Expects to Keep License

Updated on
  • U.S. has alleged Latvia’s ABLV has ties to missile program
  • ECB imposed payment moratorium on Baltic lender earlier Monday

ABLV Bank, the Latvian lender denying U.S. allegations that it’s linked to North Korea, said it doesn’t expect the European Central Bank to withdraw its license after authorities suspended its ability to process some payments.

The bank “absolutely” expects to keep its ECB authorization, and is meeting officials in Frankfurt Tuesday to discuss how to return to normal operations, spokesman Arturs Eglitis said on the sidelines of a news conference in Riga late Monday. Ernests Bernis, the bank’s chairman and co-owner, said ABLV was the victim of a “slandering campaign” and asked for a police investigation.

Earlier Monday, the ECB declared a temporary moratorium on debit operations in all currencies at the Baltic country’s third-biggest lender as depositors pulled funds in the wake of the U.S. probe. The U.S., moving to ban ABLV from the U.S. financial system, says the lender helped process transactions for entities with alleged ties to North Korea’s ballistic missile program, allegations that ABLV denies.

“In recent days, there has been a sharp deterioration of the bank’s financial position,” the ECB said in its statement. ABLV is “exploring ways to address funding shortages,” and “a prohibition of all payments by ABLV Bank on its financial liabilities has been imposed, and is now in effect.”

Trading Suspension

Nasdaq’s Riga bourse, where ABLV’s bonds are traded, said Monday that it suspended the bank’s membership, canceling all active orders. Last week, Visa Inc. restricted service for more than 9,000 of the bank’s clients.

Latvian regulators said the payment moratorium was imposed by the ECB. Earlier, they said ABLV had high levels of liquidity and capital, and that the bank had tightened its compliance procedures since the alleged incidents contained in the Treasury report.

Bernis told journalists that 600 million euros ($745 million) had been withdrawn from the bank since the Treasury Department’s report. He said the bank’s common equity Tier 1 capital ratio, a measure of financial strength, was at 16.4 percent and its liquidity ratio was 74.7 percent as of Feb. 16, compared with the required minimums of 11.75 percent and 55 percent respectively.

Moldovan Fraud

The nation’s central bank said it will lend ABLV 97.5 million euros against collateral of “safe, highly liquid” securities at the lender’s request. The central bank had bought Latvian government bonds from ABLV on Sunday to help with liquidity. ABLV has about 1.6 billion euros of bonds in its portfolio.

Latvian regulators have been cracking down on illicit banking activity, handing out record fines to firms including ABLV and tightening rules on foreign cash after a string of money- laundering allegations relating to Russia, Moldova and other ex-communist nations. The Baltic country of 2 million people has seen foreign cash held on deposit fall by more than a third since the end of 2015 because of the tighter rules.

The regulator fined three banks for handling some of the $1 billion proceeds of a Moldovan fraud in 2014, equivalent to about an eighth of that nation’s economic output. Five Latvian banks agreed last year to fines for failing to perform adequate due diligence and gather sufficient information on transactions and beneficiaries in deals linked to North Korea.

There have already been casualties in the banking system. Trasta Komercbanka AS, implicated in a scheme involving as much as $20 billion of illicit transfers from Russia, was shut down in March 2016, though it denied wrongdoing.

The turmoil in Latvia has also embroiled ECB Governing Council member Ilmars Rimsevics, who was detained over the weekend by the nation’s anti-bribery authorities and faces pressure to resign. The country’s prime minister has said Rimsevics’s case has no connection with ABLV.

— With assistance by Alessandro Speciale

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