Latvia’s Finance and Capital Market Commission (FCMC) has applied a fine of EUR 1.019 million on AS PrivatBank for violation of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing, as confirmed by FCMC Communication Office.

The bank has been given multiple other tasks. This includes submitting to FCMC a plan of actions for prevention of uncovered violations and performing an independent assessment of the bank’s internal control system.

FCMC performed an inspection at PrivatBank. During this inspection the commission found a number of violations associated with the internal control system, client base risks and management of the database. Violations point to serious flaws with the bank’s internal control system in regards to prevention of money laundering and terrorism and proliferation financing, because of flaws with client evaluation and transaction supervision.

FCMC notes that the bank has failed to create an appropriate internal control system that would ensure effective compliance with regulations. For example, the work performed by PrivatBank’s committee for supervision of measures to prevent money laundering and terrorism financing was ineffective and certain decisions made by the committee were beneficial for certain shareholders of the bank. PrivatBank’s internal control system does not provide continuous evaluation of clients across all stages of cooperation.

Additionally, PrivatBank did not take sufficient measures to ensure stated beneficial owners are actual beneficial owners of chosen clients.

FCMC informs that in multiple cases PrivatBank had failed to acquire documents and take sufficient measures to be certain of the origin of clients’ funds. The bank also failed to document conclusions, provide timely and quality evaluation of clients.

Considering the aforementioned, FCMC concluded that the bank failed to provide sufficient internal control for the prevention of money laundering and terrorism financing. Additionally, the uncovered violations are considered lasting and serious. At the same time, FCMC appreciates PrivatBank’s efforts in preventing uncovered problems.

Following FCMC’s decision, PrivatBank is expected to submit to the commission a plan of actions to fix the uncovered problems and prevent their repetition in the future. PrivatBank is to attract a sworn auditor to perform an independent evaluation of the bank’s internal control system.

The size of the fine applied to the bank is equal to 90% of the maximum amount outlined in the law – 10% of the bank’s total annual turnover.

PrivatBank has one month from the moment the administrative act comes to force to pay the fine to the state budget.

The bank’s management respects and takes seriously FCMC’s conclusions and it’s committed to fixing uncovered flaws and improving the bank’s internal control system, as stated in the bank’s statement.

PrivatBank’s Marketing and Communication Department head Jūlija Zeile says that FCMC’s decision will not affect the bank’s clients or its everyday operations. Last year’s financial indexes allow PrivatBank to pay FCMC’s applied fine.

According to the bank’s information, FCMC made its decision regarding the application of the fine in 2017.

Jūlija Zeile says that since 2016 the bank has been actively working to improve the internal control system. The bank’s operations continue changing both in regards to complying with increasing requirements against money laundering and terrorism financing and the situation in Latvia’s banking sector.

«The bank actively introduces the best international practice in AML procedures and standards, continues modernizing technologies and investing money in the bank’s systems and employees. The bank has performed considerable contributions to the money laundering prevention system in recent years and will continue doing this. The bank will maintain constructive cooperation with FCMC to improve international competitiveness of Latvia’s banking sector,» the bank reports.

According to Zeile, the bank’s capital sufficiency index remains one of the best among Latvian banks (28.65% in Q2 2019).