Latvia presses US Treasury to help lift scrutiny over key bank

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Latvia is making a push to convince US regulators to back off a now-defunct bank as the Baltic nation seeks to turn the page on a scandal that involved accusations of money laundering and illicit payments throughout the former Soviet Union.

Finance Minister Janis Reirs, who made a personal appeal to US Treasury officials during the International Monetary Fund meeting in Washington in April, said it was time for American officials to lift a proposed ban against ABLV Bank AS, once the nation’s No. 3 lender. Easing off would help boost investment and wipe the stain from Latvia’s financial system four years after the turmoil, he said.

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“We told the Treasury that we wanted to start this process, understanding that this is not a one-day process, Reirs said in an interview in the Latvian capital Riga on Wednesday. “I hope that we will move forward so that it will be taken off -- and we have also earned it.”

In 2018, the US Treasury Department proposed banning ABLV from its financial system, accusing the Baltic lender of allowing transactions of blacklisted entities from Russia and Ukraine, as well as processing illicit payments for North Korea’s ballistic missile program.

The move was at the center of a crisis that engulfed Latvia’s banking sector, which featured the arrest of the central bank governor, Ilmars Rimsevics, for soliciting bribes and the execution-style killing of an insolvency lawyer.

A Treasury spokesperson didn’t immediately respond to a query seeking comment. Both ABLV and Rimsevics deny all allegations of wrongdoing.

Latvia, a nation of 2 million that joined the European Union in 2004 and adopted the euro a decade later, had emerged as a conduit for illicit funds from across the former Soviet world.

The government’s ensuing crackdown involved replacing top officials, pushing out shell companies and tightening due-diligence rules. Foreign-held deposits have dropped to 15 percent from more than half in 2015.

While the measures helped Latvia avoid being placed on a so-called gray list by the Financial Action Task Force, it also drew complaints from foreign investors and businesses over limited access to financial services.

Four years after it was closed, ABLV’s liquidation continues as analysts comb through transactions and suspect funds that may be frozen and possibly seized. The Riga-based bank was allowed to handle its own liquidation despite US allegations, though under heavy supervision by regulators.

Reirs wasn’t alone with his pitch. Justice Minister Janis Bordans and Welfare Minister Gatis Eglitis also discussed lifting Treasury’s proposal on a recent visit, Eglitis said on a Latvian public TV program.

The Treasury proposal, which triggered a run on the bank’s deposits, remains in place and has hit investment, Reirs said. The finance minister said the US proposal likely played a role in a recent decision by an unnamed European retail bank not to enter the Latvian market.

“This isn’t to help some institution or people,” he said. “This is necessary for the state’s security, financial security and economic security.”

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