[Federal Register Volume 89, Number 188 (Friday, September 27, 2024)]
[Proposed Rules]
[Pages 79184-79186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-22299]



[[Page 79184]]

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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Part 1010

RIN 1506-AB39


Proposal of Special Measure Against ABLV Bank, AS as a Financial 
Institution of Primary Money Laundering Concern; Withdrawal

AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.

ACTION: Withdrawal of finding and notice of proposed rulemaking.

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SUMMARY: This document withdraws FinCEN's finding that ABLV Bank AS 
(ABLV) is a financial institution of primary money laundering concern 
and the related notice of proposed rulemaking seeking to impose the 
fifth special measure regarding ABLV, pursuant to section 311 of the 
USA PATRIOT Act (section 311). Because of material subsequent 
developments that have mitigated the money laundering risks associated 
with ABLV, FinCEN has determined ABLV is no longer a financial 
institution of primary money laundering concern that warrants the 
implementation of a special measure under section 311.

DATES: The finding and notice of proposed rulemaking, published at 83 
FR 6986 (Feb. 16, 2018), are withdrawn as of September 27, 2024.

ADDRESSES: Mail: Global Investigations Division, Financial Crimes 
Enforcement Network, P.O. Box 39, Vienna, VA 22183.

FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at 1-800-
767-2825 or electronically at <a href="/cdn-cgi/l/email-protection#deb8acbd9eb8b7b0bdbbb0f0b9b1a8"><span class="__cf_email__" data-cfemail="ddbbafbe9dbbb4b3beb8b3f3bab2ab">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Background

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (the 
``USA PATRIOT Act''). Title III of the USA PATRIOT Act amended the 
anti-money laundering provisions of the Bank Secrecy Act (BSA) \1\ to 
promote the prevention, detection, and prosecution of international 
money laundering and the financing of terrorism. Section 311 of the USA 
PATRIOT Act (section 311), codified at 31 U.S.C. 5318A, grants the 
Secretary of the Treasury (Secretary) authority, upon finding that 
reasonable grounds exist for concluding that one or more financial 
institutions operating outside the United State is of primary money 
laundering concern, to require domestic financial institutions and 
financial agencies to take certain ``special measures''. The authority 
of the Secretary to administer the BSA and its implementing regulations 
has been delegated to the Director of FinCEN.\2\
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    \1\ The BSA, as amended, is the popular name for a collection of 
statutory authorities that FinCEN administers that is codified at 12 
U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and 
includes other authorities reflected in notes thereto. Regulations 
implementing the BSA appear at 31 CFR chapter X.
    \2\ Pursuant to Treasury Order 180-01, the authority of the 
Secretary of the Treasury (Secretary) to administer the BSA, 
including, but not limited to, 31 U.S.C. 5318A, has been delegated 
to the Director of FinCEN. Treasury Order 180-01 (Jan. 14, 2020).
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    The five special measures enumerated under section 311 are 
safeguards that may be employed to defend the U.S. financial system 
from money laundering and terrorist financing risks. The Secretary may 
impose one or more of these special measures in order to protect the 
U.S. financial system from such threats. Through special measures one 
through four, the Secretary may impose additional recordkeeping, 
information collection, and information reporting requirements on 
covered domestic financial institutions and domestic financial 
agencies--collectively, ``covered financial institutions''.\3\ Through 
special measure five, to the Secretary may prohibit, or impose 
conditions on, the opening or maintaining in the United States of 
correspondent or payable-through accounts by covered financial 
institutions.\4\
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    \3\ 31 U.S.C. 5318A(b)(1)-(b)(4).
    \4\ 31 U.S.C. 5318A(b)(5).
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II. Procedural History and Subsequent Events

A. Finding and Notice of Proposed Rulemaking

    On February 16, 2018, FinCEN issued a notice of proposed rulemaking 
(NPRM) that (1) set forth FinCEN's finding that ABLV, a commercial bank 
located in Riga, Latvia, was, at that time, a foreign financial 
institution of primary money laundering concern and (2) proposed 
imposing special measure five under section 311, prohibiting covered 
financial institutions from opening or maintaining in the United States 
correspondent accounts for, or on behalf of, ABLV.\5\
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    \5\ FinCEN, Proposal of Special Measure Against ABLV Bank, AS as 
a Financial Institution of Primary Money Laundering Concern, 83 FR 
6986 (Feb. 16, 2018), available at https://www.fincen.gov/sites/default/files/federal_register_notices/2018-02-16/2018-03214.pdf.
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B. Subsequent Developments

    In light of significant developments since FinCEN issued that NPRM, 
FinCEN has now determined that ABLV is no longer a financial 
institution that is of primary money laundering concern.
1. ABLV Lost Its License, Ceased Banking Operations, and Is Undergoing 
Irrevocable and Supervised Liquidation
    On February 23, 2018 (one week after FinCEN issued its NPRM), the 
European Central Bank (ECB) determined that ABLV--as well as its 
subsidiary ABLV Bank Luxembourg--was failing or likely to fail, noting 
that, following issuance of FinCEN's NPRM, ABLV had experienced an 
abrupt wave of deposit withdrawals and increasing lack of access to 
U.S. dollar funding.\6\ As a result, the ECB instructed the Latvian 
supervisory authority, the then-named Financial and Capital Markets 
Commission (FCMC),\7\ to impose a moratorium on ABLV in order to 
provide the bank time to stabilize operations. A similar moratorium was 
placed upon ABLV's subsidiary in Luxembourg.\8\ In addition, on July 
11, 2018, ECB formally withdrew ABLV's banking license.\9\
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    \6\ See ECB, Press Release, ECB determined ABLV Bank was failing 
or likely to fail (Feb. 24, 2018), available at https://www.bankingsupervision.europa.eu/press/pr/date/2018/html/ssm.pr180224.en.html.
    \7\ In January 2023, the FCMC was integrated into the Bank of 
Latvia. Latvijas Banka, Press Release, As of 1 January, the FCMC 
will be integrated into Latvijas Banka (Dec. 28, 2022), available at 
https://www.bank.lv/en/news-and-events/news-and-articles/press-releases/16285-as-of-1-january-the-fcmc-will-be-integrated-into-latvijas-banka.
    \8\ See id.
    \9\ See Nasdaq, ECB Withdraws Credit Institution's License of 
ABLV Bank, AS in Liquidation (July 12, 2018), available at https://view.news.eu.nasdaq.com/view?id=bd5ccbdd7886f3040713f0c5eb9193353&lang=en.
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    As a consequence of the ECB's determination and subsequent action 
by relevant national authorities, ABLV and its subsidiary began winding 
up shortly afterwards. On June 12, 2018, ABLV--with the approval of 
FCMC--entered irrevocable liquidation, formally changing its name to 
ABLV Bank-in-Liquidation.\10\ By July 12, 2018, ABLV no longer operated 
as a depository institution. On January 29, 2019, Luxembourg's main 
financial regulatory authority, the Commission de Surveillance du 
Secteur Financier (CSSF), issued a fine against ABLV Bank Luxembourg of 
[euro]250,000, the maximum

[[Page 79185]]

allowable by law, on the finding that, inter alia, ABLV had failed to 
comply with obligations established under Luxembourg's AML/CFT legal 
requirements.\11\ Shortly afterward, the Luxembourg courts ordered ABLV 
Bank Luxembourg dissolved.\12\
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    \10\ See Reuters, Latvian bank regulator approves liquidation of 
ABLV Bank (June 12, 2018), available at https://www.reuters.com/article/business/latvian-banking-regulator-approves-liquidation-of-ablv-bank-idUSKBN1J82E0/.
    \11\ See CSSF, Administrative penalty imposed on the credit 
institution ABLV Bank Luxembourg S.A. (Jan. 29, 2019).
    \12\ See CSSF, Dissolution and judicial liquidation: ABLV Bank 
Luxembourg S.A.--Appointment of liquidators (July 2, 2019).
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    Significantly, since July 2018, ABLV-in-Liquidation has undergone a 
strictly supervised liquidation process, closely monitored by the 
Government of Latvia, which ensures AML/CFT compliance. Throughout the 
process (which is at an advanced stage), Latvian authorities have kept 
FinCEN apprised of ABLV's liquidation with updates on the authorities' 
role in: (1) supervising the liquidation; (2) approving updates to the 
liquidation methodologies for verifying creditors and ensuring AML/CFT 
and sanctions compliance; (3) reviewing the liquidators' submitted 
reports; and (4) monitoring ABLV creditors' claims.\13\
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    \13\ Notably, Latvian authorities ultimately confirmed that, 
having reviewed the bank's records, they found evidence to support 
FinCEN's findings in the NPRM concerning the complicity of ABLV 
owners, shareholders, and senior leadership in the use of the bank 
for money laundering purposes.
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    Further, under liquidation, ABLV has engaged in minimal ongoing 
activity, continues to exist as a legal entity to solely conclude 
liquidation, and is conducting, and subject to, ongoing efforts to 
identify additional past illicit activity. Notably, the ongoing efforts 
to identify additional past illicit activity--comprised of 
administrative and criminal investigations by relevant Latvian 
authorities into the activities of the bank and its shareholders--
underscore the gravity with which Latvian authorities are treating the 
matter. Of note, those investigations have already resulted in criminal 
charges against the owners and senior managers of ABLV,\14\ ensuring 
that any potential future application for a bank license in Latvia or 
other EU member states by these individuals would elicit the heightened 
scrutiny established by the relevant EU rules.\15\
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    \14\ OCCRP, Latvian Prosecutors Charge Bankers with Laundering 
2.1B Euro (July 29, 2022), available at https://www.occrp.org/en/news/latvian-prosecutors-charge-bankers-with-laundering-21b-euro.
    \15\ European Bank Authority, Final Report on Joint ESMA and EBA 
Guidelines (July 2, 2021), pp. 38-40, available at https://www.eba.europa.eu/sites/default/files/document_library/Publications/Guidelines/2021/EBA-GL-2021-06%20Joint%20GLs%20on%20the%20assessment%20of%20suitability%20(fit&pr
opoer)/1022127/
Final%20report%20on%20joint%20EBA%20and%20ESMA%20GL%20on%20the%20asse
ssment%20of%20suitability.pdf.
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    Given the revocation of ABLV's licenses, significant efforts to 
identify and address past illicit activity, and the advanced stage of 
liquidation of ABLV, ABLV-in-Liquidation is no longer a financial 
institution of primary money laundering concern.
2. Marked Systemic Improvements to the Latvian AML/CFT Regime and 
Oversight
    In parallel with targeted efforts relating to ABLV, the Government 
of Latvia has also made notable progress with a series of meaningful 
legal and regulatory reforms in its financial sector since issuance of 
FinCEN's NPRM that have substantially reduced non-resident deposit 
activity, a principal source of FinCEN's money laundering concern, and 
strengthened both its AML/CFT authorities and institutional capacity. 
In particular, in April 2018, the Government of Latvia took the first 
of many actions to remediate AML/CFT regime weaknesses and compliance 
failures by prohibiting most transactions with shell companies.\16\ 
Shortly afterwards, in November 2018, the Government of Latvia 
reorganized the Financial Intelligence Unit (FIU) from under the 
Prosecutor General's Office, granting the FIU independence and 
autonomy.\17\ Finally, in 2019, the Government of Latvia adopted a 
series of legal and regulatory reforms to its AML/CFT regime. Those 
reforms extended the scope of the financial regulator--formerly the 
FCMC, which was absorbed by the Bank of Latvia in January 2023 \18\--to 
increase AML/CFT supervision in the financial and capital markets 
sectors. The Government of Latvia also amended the Law on the 
Prevention of Money Laundering and Terrorism and Proliferation 
Financing in several ways, including: (1) introducing a fit-and-proper-
person test for banking senior management and compliance employees; (2) 
requiring termination of the pending business relationship for any 
customer who fails due diligence; (3) prohibiting the opening and 
maintaining of anonymous accounts; (4) expanding the definition of 
``beneficial ownership'' to include indirect control; (5) clarifying 
Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements 
through adding additional industries subject to KYC/CDD and introducing 
ongoing monitoring and verification of source of wealth; (6) requiring 
the State Revenue Service to provide information on politically exposed 
persons, their relatives, and close associates; (7) mandating Enhanced 
Due Diligence (EDD) for customers from high-risk jurisdictions; (8) 
expanding requirements for suspicious transaction reports; and (9) 
authorizing the FCMC (now Bank of Latvia) to revoke banking licenses or 
otherwise suspend economic activity.\19\
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    \16\ Cabinet of Ministers Republic of Latvia, Saeima Imposes the 
Ban on Servicing Shell Companies (Apr. 27, 2018), available at 
https://www.mk.gov.lv/en/article/saeima-imposes-ban-servicing-shell-companies.
    \17\ Office for Prevention of Laundering of Proceeds Derived 
from Criminal Activity, Annual Report for 2018 (Mar. 31, 2019), 
available at https://fid.gov.lv/uploads/files/English%20version/Annual_Report_2018_EN.pdf.
    \18\ See supra note 7.
    \19\ Cabinet of Ministers Republic of Latvia, Latvian Financial 
Sector Update, No. 15 27 June 2019 (June 27, 2019), available at 
https://www.mk.gov.lv/en/media/1678/download.
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    In 2021, the Government of Latvia implemented further changes to 
its Law on the Prevention of Money Laundering and Terrorism and 
Proliferation Financing, including: (1) expanding the scope of AML/CFT 
regulations and oversight to cover additional types of businesses and 
legal entities; (2) including real estate agents and brokers as 
entities obligated to follow AML/CFT requirements; (3) requiring 
continuous and ongoing training for those entities with AML/CFT 
obligations; (4) requiring that beneficial owners cannot have been 
convicted of international crimes or crimes against the state; (5) 
expanding upon the risk assessment triggers used by financial 
institutions; and (6) adopting new tools and software to assist with 
due diligence and the filing for suspicious transaction reports.\20\
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    \20\ Anti-Money Laundering and Terrorism and Proliferation 
Financing Act, available at https://likumi.lv/ta/id/178987#p3.
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    The Government of Latvia and the ECB have also added additional 
rules to assess the suitability of individuals to own or run a bank 
(i.e., fit-and-proper person tests).\21\ These rules now consider 
whether criminal charges have been filed against prospective bank 
officials and owners, irrespective of final verdict, and how such 
allegations might affect the bank's reputation.
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    \21\ Regulation on the Assessment of the Suitability of the 
Executive and Supervisory Board Members and Key Function Holders, 
available at https://www.bank.lv/images/pielikumi/tiesibu-akti/Normativie_noteikumi_nr_94_ENG_Regulation_on_the_Assessment_of_the_Suitability_of_MB_KFH_FCMC_No94.pdf; ECB, Guide to fit and proper 
assessments (Dec. 2021), pp. 14-22, available at https://
www.bankingsupervision.europa.eu/ecb/pub/pdf/
ssm.fit_and_proper_guide_update202112~d66f230eca.en.pdf.
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    As a result of these and other efforts by the Government of Latvia, 
the share of non-resident deposits in Latvia's financial sector--one of 
the principal risk factors in Latvia's private sector that existed at 
the time of publication of the

[[Page 79186]]

NPRM--has decreased steadily from 2016 to the present.

III. Withdrawal of the Finding and NPRM

    For the reasons set forth above and taking into account the 
Government of Latvia's significant efforts to reform its AML/CFT 
regime, FinCEN is satisfied that ABLV no longer poses a money 
laundering threat to the U.S. financial system. Therefore, FinCEN 
hereby withdraws its finding that ABLV is of primary money laundering 
concern and the related NPRM published on February 16, 2018, seeking to 
impose special measure five regarding ABLV.

Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-22299 Filed 9-26-24; 8:45 am]
BILLING CODE 4810-02-P


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