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Friday 13.12.2019 | Name days: Veldze, Lūcija
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New York Times: stakes are high for Latvia in the fight against money laundering

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US newspaper New York Times has published an article detailing problems with Latvia’s finance system, admitting that stakes are especially high in the fight against money laundering in this Baltic country.

«For years, according to the authorities in Europe and the United States, some banks in the drowsy Baltic port city of Riga specialized in helping these and other criminals wipe their fingerprints off dirty money before it was moved to offshore havens,» NYT writes.

As examples, NYT mentions the investment consultant whose financial pyramid had stolen from Russian residents USD 10 million, the Taiwanese businessman who helped North Korea acquire precision tools to advance its nuclear arms programme, as well as the corrupt Ukrainian politician who tried to launder millions stolen from his country.

Recent scandals involving Scandinavian banks Swedbank and Danske Bank revealed that accounts in Baltic States were used to process millions of euros of dubious origin. This is why USA decided to increase pressure against Baltic States to prevent Russian citizens from circumventing sanctions, NYT writes.

Latvian officials have promised to take measures against banks that have breached the law and have «made the country one of the world’s pre-eminent money-laundering centers», NYT adds.

«For Latvia, a country of two million people, the stakes are high,» the newspaper writes, adding that Latvia’s economy has already suffered from investment decline and is at risk of ending up in the so-called grey list, which could limit global market’s accessibility for Latvia, making it impossible for Latvian residents to use their credit cards abroad.

«Once a promising example of the transition from Soviet-style communism to Western liberal democracy, Latvia could join a list that includes a rogue’s gallery of money-laundering centers like Pakistan, Syria, and Trinidad and Tobago,» NYT warns.

The newspaper also cites Latvian Finance Minister Jānis Reirs’ words that «this is a matter of the country’s reputation», therefore it has become a priority for Prime Minister Krišjānis Kariņš.

At the same time, foreign observers are sceptical about the abilities of the small and relatively poor Latvia to oppose Russian oligarchs and organized crime who are engaged in local politics. The newspaper reminds that the government is composed of «an unstable alliance of five center-right parties».

Washington-based Atlantic Council think tank expert on Russia Anders Aslund says problems are created by Russian and Ukrainian capital banks in Latvia whose owners have dubious reputation. «These people are strong and skillful,» he said.

NYT points that «a few people in Latvia have gotten rich helping criminals move their money into the mainstream financial system».

The newspaper also adds that uncovered illegalities impact Latvia’s reputation as a NATO and Eurozone member state, which has reduced lending rates and has made banking business in the country more complicated.

In several cases, western companies have decided to not use services of Latvian credit institutions, making transactions using US dollars almost completely unavailable in Latvian bank. To perform transactions using US dollar, clients have to wait longer and this service costs more, NYT writes.

Increased tension with US and EU financial systems pushes back Latvia’s efforts to distance itself from Russia and bring the country closer to the west, NYT concludes, allowing that in a way money laundering helps Russia’s President Vladimir Putin destabilize the EU and increase the riches of his friends.

The newspaper also mentions the criminal case involving Bank of Latvia governor Ilmārs Rimšēvičs and the closure of ABLV Bank from pressure caused by the US Department of Treasury.

«Latvia has also been an embarrassment for the European Union, which has mostly been a bystander as the United States government forced a crackdown,» notes NYT.

The newspaper reminds that the US Department of Treasury concludes that ABLV Bank had assisted Ukrainian businessman Serhiy Kurchenko to launder billions of euros embezzled from the Ukrainian government.

North Korea was also a client of ABLV Bank, the newspaper mentions.

In 2014, Taiwanese citizen Hsien Tai Tsai admitted in USA to using banks in Latvia and Estonia as corridors for money transfers intended to supply North Korea with precision metalworking machines for its nuclear arms programme.

Although Latvian authorities have intensified efforts against banks that service non-residents and have adopted other money laundering prevention measures, Moneyval report concludes that implementation of regulations is weak, because the people accused of money laundering are able to delay court proceedings for years, and so far no one has been sentenced to prison in Latvia for money laundering. Fines applied for money laundering, on the other hand, are too soft and are generally considered «a fee to continue doing business,» NYT writes.

The newspaper also cites the words of Finance Ministry’s deputy state secretary for finance policy affairs Līga Kļaviņa, who said Latvia will avoid ending up on the grey list. However, she added there is one factor Latvia cannot change: «We are where we are geographically».


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