August 23, 2018 / 5:10 PM / 3 months ago

Latvia must do more to tackle money-laundering - watchdog

RIGA/LONDON, Aug 23 (Reuters) - Latvia must do more to enforce its laws against financial crimes, a European monitoring body said on Thursday, in a report published in the wake of the collapse of the country’s third largest bank in a money laundering scandal.

Moneyval - the Council of Europe’s watchdog on measures against money-laundering - said the Baltic state needed to carry out more investigations and criticised its record on arresting criminals and confiscating their funds.

The report came two months after Latvia’s banking regulator approved the self-liquidation of ABLV Bank, which Washington had accused of covering up money laundering, bribing officials and facilitating the breach of sanctions against North Korea.

“While the legal framework is pretty solid ... the main focus should be to actually use the tools,” said Daniel Thelesklaf, Moneyval’s chairman.

“What we expect to see in a short period of time is more results which means more investigations, more indictments, prosecutors standing up and doing their job, and bringing cases to court,” he said.

Latvian Finance Minister Dana Reizniece-Ozola promised to act on the report after meeting colleagues from the cabinet to discuss it.

“We have a year in order to show real improvements,” she told journalists.

“If there is not enough progress ... Latvia might be included in the grey list, which ... means burdens on payments, especially cross-border payments,” she said.

Since securing independence from Russia in 1991, more than a dozen Latvian banks have promoted themselves as a gateway to Western markets for clients in Russia and former Soviet states such as Ukraine - and promised Swiss-style secrecy for clients.

At the peak in 2015, Latvian banks held deposits of about 12 billion euros ($14 billion) for foreign customers. Bankers and officials have said much of the money came from Russia.

“We have to stop wasting time,” said Ilze Znotiņa, who was appointed the head of Latvia’s Financial Intelligence Unit (FIU) in June.

Changing its approach to banking presents Latvia with a difficult balancing act. Washington is an important military ally for the former Soviet-ruled state of 2 million people on the EU’s eastern flank. It also has close historical and trade ties with Russia. ($1 = 0.8744 euros) (Writing By John O’Donnell Editing by Andrew Heavens)

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