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Saturday 24.03.2018 | Name days: Kazimirs, Izidors

NP: Latvian banks involved in massive international money-laundering schemes; no one is punished

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe European Union and entire organizations have been criticizing Latvia for its negligence to combat money laundering schemes over the course of the past fifteen years. Throughout this massive period of time, Latvian banks have been involved in enormous international money laundering schemes. Unfortunately, no one has been punished for that and dirty money continues flowing through the country, Nekā personīga reported on 14 May.

The programme reports that a group of experts from the European Council’s money laundering prevention office will arrive in Latvia in autumn to look at what was accomplished in the past several years. Only nine people were punished for money laundering in Latvia last year.

As noted by NP, Justice Ministry and responsible Saeima committees are currently rushing amendments to the law in order to change the definition of money laundering and expand the range of people that can be prosecuted for this crime. This could shake up statistics, but there are serious doubts about doing much to improve Latvia’s contribution to the fight against money launderers.

Latvian banks are famous not only for their good quality but also their services provided to international fraudsters. Money stolen from Russian officials – the so-called Magnitsky case, in which a billion was stolen from Moldova’s and Ukraine’s budget – all this money went through Latvia. Unfortunately, no one was punished for it, the programme reports.

Three years ago, Moldova was struck by a financial scandal, NP reminds. One billion euros had simply disappeared from three of the country’s largest banks in a span of one day. Investigation performed by international detective agency Kroll revealed that the banks were emptied by a local oligarch Ilan Shor.

Transactions were performed through Latvian Banks. The case mentions Aizkraukles Bank, Latvijas Pasta Bank and Privatbank. Accounts were opened in those banks to process transactions. Moldovan, Russian and Ukrainian residents were stated as beneficiaries.

Finance and Capital Market Commission punished Privatbank with the largest fine up until now. The bank and its management were fined EUR 2 million. The criminal process investigating possible crimes committed by the bank’s employees continues to this day, the programme reports.

«This was one of many money laundering schemes after which international organizations asked Latvia to strengthen its fight against such crimes, especially in international transactions,» NP journalists say.

Latvian investigators don’t have much luck with such investigations. Cases regarding money laundering are complicated. There is a deficit of qualified police officers to tackle such cases. Investigators need education in law and knowledge of investigative procedures, as well as good foreign language and economics skills. But there aren’t many investigators. People with appropriate education and skills are paid higher wages in the private sector than they are in the police force.

According to statistical data from the prosecutor’s office, 231 money laundering cases were registered in the Latvia in 2015 and 120 in 2016. Unfortunately, only 10% of such cases make it to court. Courts received 13 such cases in 2014, 6 in 2015 and only four in 2016. None of those criminal cases were about international crimes.

Moneyval work group will arrive in Latvia at the end of October to assess the country’s accomplishments in the past several years. Latvia’s laws comply with conventions, directives and declarations, but there are no tangible results from that.

Justice Ministry’s deputy state secretary Laila Medina comments on the matter the following way: «Although we see that money laundering combating efforts are one of the government’s main priorities, reality is rather harsh. Ten, maybe fewer, guilty verdicts were handed down in the past three years. This does not in any way reflect the estimates for the scale of money laundering activities in Latvia.»

Medina continues: «We believe it is necessary to change the definition of the term and simplify the work of law enforcement authorities to help them catch money launderers more efficiently. The hardest part of proving the fact of money laundering in court is the intention behind a suspect’s decision to hide the origin of the money in question.»

The ministry’s representative also notes that after the ministry’s amendments money laundering will apply to the same actions as before, except there will no longer be any difference in whose favour illegal activities were performed. The prosecutor’s office opposes the changes. The prosecutor’s office says changing the section on money laundering would expand the range of suspects against whom this section can be used. For example, money laundering section of the law would be applicable to situations when a person makes coffee using a stolen coffee machine or when a group of people drink a stolen bottle of vodka.

«Secondly, the crime would be considered committed the moment when a criminal gets his hands of the ‘goods’. This includes situations when a corrupt official takes the money home or transfers it to his account. Investigators will no longer have to look for the money in investments, properties registered on relatives’ names or other bribes. This will tempt investigators to stop deepening their investigations al the way,» Medina explains.

Prosecutor Juris Juriss comments the situation the following way: «We have to look at the goal and the core of international conventions and EU directives. What is their goal: stopping the inflow of dirty money into the financial system, prevention of financing of terrorism – all global and important goals. As I’ve said before – we need to focus on investigations of large cases.»

«The intention to hide or mask is what motivates investigators and law enforcement institutions to think about the ways money enters the financial system,» he says.

Justice Ministry’s developed amendments to the Law on the Prevention of Money Laundering and Terrorism Financing have been submitted to the Saeima. Other changes to the law are also proposed. The Saeima has even voted in favour of certain changes in two readings already. Defence, Internal Affairs and Corruption Prevention Committee’s deputies like proposals. The committee’s chairman Ainars Latkovskis is angry over the fact that the prosecutor’s office has noticed problems with already supported amendments, the programme reports.

Ainars Latkovskis told Nekā personīga: «I think there has been a clash of opinions. They are simply splitting hairs here. Your programme has emphasized it many times in the past that such cases are a rarity in Latvia. One of the biggest problems that were mentioned by experts is the law, specifically the requirement to prove the crime was committed intentionally, which is hard to prove. I think it is unnecessary – facts are enough to see dirty money is being laundered.»

«This particular section of the law makes it harder for police, prosecutors and court to punish criminals. I think it is absurd to split hairs, and this is why the committee has voted unanimously in favour of the ministry’s proposal. I am worried, however, that lawyers will start splitting hairs,» Latkovskis says.

The programme asked him: «Don’t you think it could be used to increase statistics?», and here responded by saying: «No, it’s absurd! Why would they apply this section – it’s about theft!»

Janis Baumanis, scientifically analytical advisor to the Supreme Court of Justice of the Republic of Latvia, told NP: «The Supreme Court has no objections against amendments submitted to the Saeima for the third reading. They have to be reviewed in the context of application of measures associated with it.»

He added: «Judges are concerned that significant proposals have been submitted for the third reading too quickly, and because of that there will not be debates about them. Arguments voiced by deputies during Saeima debates in the first and second reading are a tool courts can used if it is unclear how laws are to be applied in practice. This can be useful if amendments to the law in question come into force in Justice Ministry’s intended redaction.»


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