The European Central Bank halted payments by ABLV, one of Latvia's biggest banks, on Monday, amid accusations from the United States Treasury that the lender had been involved in money laundering and unauthorised transactions with the heavily sanctioned nation of North Korea. The ECB said it had instructed Latvia's banking supervisor to impose a moratorium on the bank, freezing all payments by the bank on its liabilities. "In recent days, there has been a sharp deterioration of the bank's ... </s> HELSINKI — Latvia's financial regulator has ordered the crisis-struck ABLV Bank to cease all payments on the request of the European Central Bank amid U.S. accusations of money laundering and breaching sanctions on North Korea.

The ECB said Monday that the Financial and Capital Markets Commission of Latvia has imposed "a prohibition of all payments by ABLV Bank on its financial liabilities" until further notice.

The ECB noted that ABLV has seen a sharp deterioration of its financial position in recent days

Latvia's central bank said separately that it would loan ABLV 97.5 million euros ($121 million) against "a reliable pledge of highly liquid securities" instead of 480 million euros ABLV had requested.

ABLV is Latvia's third largest bank by assets. </s> RIGA/FRANKFURT (Reuters) - Latvian bank ABLV said on Monday it is taking the European Central Bank to court for triggering its demise after it faced allegations of money laundering.

FILE PHOTO: A logo of the ABLV Bank is pictured in Riga, Latvia February 18, 2018. REUTERS/Ints Kalnins

The development is the latest challenge to the European banks supervisor over its handling of the affair, over which it has been widely criticised.

Earlier this year the United States accused Latvia’s third biggest bank, ABLV, of money laundering and breaking sanctions on North Korea, prompting its closure and triggering the Baltic state’s worst financial crisis in a decade.

The scandal placed the country of two million people in the middle of a power struggle between Russia and the United States, and fuelled a debate over European money-laundering controls.

It also caught the ECB, the euro zone’s top supervisor of banks, by surprise, and led to criticism by European lawmakers for what they see as its failure to monitor the bank on the outskirts of the currency bloc.

The ECB, which declined to comment on Monday, has sought to play down its role, arguing that it was not responsible for monitoring money laundering.

But ABLV, which is chiefly owned by two wealthy Latvian bankers, Ernests Bernis and Olegs Fils, said it had filed legal action with the Court of Justice of the European Union against the euro zone’s central bank for its role in its collapse.

The ECB’s move to stop payments at the bank and subsequent declaration that it was failing sealed ABLV’s fate. Okko Hendrik Behrends, the Latvian bank’s lawyer, said the ECB should not have triggered ABLV’s closure because it was financially healthy and could have survived.

REFORM SETBACK

Latvia is trying to repair its reputation by paring back those banks that attracted clients in Russia and former Soviet states such as Ukraine with the promise of Swiss-style secrecy.

Its Prime Minister Maris Kucinskis has pledged to improve the policing of banks, while Washington, an important military ally for the former Soviet-ruled state, is keeping up pressure on Latvia to tackle money laundering, much of which Latvian officials and bankers privately say involves wealthy Russians.

But reform is proving difficult as Russian-speaking opposition lawmakers, who come from a 500,000-strong minority in the country, are sceptical about the need for change.

The overhaul hit another snag on Monday when Latvia’s prosecutor general postponed the appointment of a new head of the country’s anti-money laundering agency.

Since securing its independence from Moscow in 1991, more than a dozen Latvian banks have promoted themselves as a gateway to Western markets for largely Russian customers.

After it joined the European Union in 2004, transfers were deemed less risky for Western banks to handle than if they had come directly from Russia, bankers and officials have said.

In many cases, money was lodged in a Latvian bank and then funnelled to accounts elsewhere, such as Switzerland, they said.

In a separate case before the European Court, the ECB alleges Latvian authorities broke the law by keeping the country’s central bank governor from fulfilling his role as an ECB policymaker because of bribery allegations.

The Latvian government has barred the central bank chief, Ilmars Rimsevics, from leaving the country after he was detained in a bribery probe. He has denied wrongdoing. </s> HELSINKI (AP) — Latvia's anti-corruption agency says it suspects the nation's central bank chief of demanding and receiving bribes of at least 100,000 euros ($125,000) and has started a criminal investigation against him.

The agency said Monday that no formal charges have so far been filed against Ilmars Rimsevics, who is also on the top policymaking council of the European Central Bank.

On Friday, the agency raided the office and a property of Rimsevics and detained him on Saturday.

Prime Minister Maris Kucinskis said after an extraordinary Cabinet meeting Monday that the central banker will face "restrictions" to be announced later.

He was quoted by the Baltic News Service as saying: "At the very minimum, he will be banned from continuing in office."

Rimsevics has served as Bank of Latvia's governor since 2001. Latvia joined the euro-zone in 2014.

Meanwhile, Latvia's financial regulator has ordered the crisis-struck ABLV Bank to cease all payments on the request of the European Central Bank amid U.S. accusations of money laundering and breaching sanctions on North Korea.

The ECB said Monday that the Financial and Capital Markets Commission of Latvia has imposed "a prohibition of all payments by ABLV Bank on its financial liabilities" until further notice.

The ECB noted that ABLV has seen a sharp deterioration of its financial position in recent days.

Latvia's central bank said separately that it would loan ABLV 97.5 million euros ($121 million) against "a reliable pledge of highly liquid securities" instead of 480 million euros ABLV had requested.

ABLV is Latvia's third largest bank by assets.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. </s> Today, Latvia’s ABLV Bank—its third largest, and largest private bank—announced that it had received approval from the Council of Financial and Capital Market Commission (FCMC) to liquidate, and that the Bank was proceeding with the process of liquidation.

The proximate cause was the U.S. Treasury. It invoked Section 311 of the USA Patriot Act on February 13th, asserting that the ABLV had an “institutionalized money-laundering” problem, including sanction-busting transactions with North Korea. This spelled a death sentence for the ABLV.

At first glance, this is an astounding development. Just last fall, Anders Aslund, an authority on the Latvian economy and Latvia’s banking system, published a comprehensive report on banking system. Aslund’s report focused on money-laundering. He concludes that:

In the period 2008- 15, four major money laundering cases that involved some Latvian banks were revealed. The cases have been thoroughly investigated, and serious punishments, including the revocation of two bank licenses and multiple million-euro fines have been imposed. The Latvian authorities have carried out all conceivable measures to put an end to all money laundering. They have adopted all desired legislation and the consensus judgment is that implementation has become firm since 2015. In 2004, Latvia became a member of the European Union (EU), after having adopted extensive EU legislation. In 2005, it started cooperating with the US Treasury Financial Crimes Enforcement Network, and the US Treasury has been a driving force in AML/CTF endeavors. The main effort was undertaken from 2014 to 2016. In January 2014, Latvia adopted the euro and become a member of the Eurozone as well as the European Banking Union, being supervised by the European Central Bank (ECB). In November 2014, the ECB established the Single Supervision Mechanism (SSM) for banks in the European Union, which became operational on January 1, 2016. The ECB supervises the three biggest Latvian banks, while the other Latvian banks are supervised by the Latvian FCMC in cooperation with the ECB."

As far as the ABLV’s financials are concerned, I used Texas Ratio diagnostics to determine the Bank’s soundness. This Ratio was used during the U.S. Savings and Loan Crisis, which was centered in Texas. The Texas Ratio is the book value of all non-performing assets divided by equity capital plus loan-loss reserves. Only tangible equity capital is included in the denominator. Intangible capital — like goodwill — is excluded.

The ratio measures the likelihood of failure by comparing a bank’s bad assets with its available provisions for bad loans plus its capital. When the ratio exceeds 100%, a bank does not have the capacity to absorb its losses from troubled assets. In consequence, it will either require a fresh capital injection, or it will fail.

The table below presents the ABLV’s Texas Ratio, which is based on the Bank’s most recent quarterly report (as of 30 June 2017). The ABLV’s Texas Ratio is rather low, indicating strength, not weakness. Indeed, the financials do not give so much as a whiff of liquidation. </s> RIGA, Feb 19 (Reuters) - Latvia's third-biggest bank sought emergency financial support on Monday after U.S. officials accused it of helping breach North Korean sanctions, hours after the central bank governor was arrested over separate bribery allegations.

The financial sector in Latvia, a small euro zone state that shares a border with Russia, has come under wider scrutiny for being a conduit for illicit financial activities.

ABLV Bank was ordered by the European Central Bank to stop all payments as its liquidity position had deteriorated sharply since the U.S. Treasury accused it of allowing clients to conduct business with North Korea.

The Treasury's Financial Crimes Enforcement Network (FCEN) said bank executives and management had bribed Latvian officials to cover up their activities.

"ABLV has institutionalized money laundering as a pillar of the bank´s business practices," the FCEN said in a statement linking some of the alleged activities to North Korea's ballistic missiles program.

The bank has said the U.S. accusations were based on unfounded and misleading information.

The Latvian central bank said it had agreed to provide 97.5 million euros worth of funding to ABLV but the bank had yet to receive the money.

ABLV said it had ample collateral so was not seeking a bailout, just temporary liquidity support.

The bank will hold a news conference at 1500 GMT.

The economy in Latvia, which gained independence from the Soviet Union in 1991, has boomed in recent years. Its commercial banking sector is dominated by Nordic banks alongside a number of privately-owned local lenders.

In its document detailing the allegations against ABLV, the FCEN said the reliance of the Latvian banking system on non-resident deposits for capital exposed it to increased illicit finance risk. It said such deposits amounted to roughly $13 billion.

"Non-resident banking in Latvia allows offshore companies, including shell companies, to hold accounts and transact through Latvian banks," it said, adding criminal groups and corrupt officials may use such schemes to hide true beneficiaries or create fraudulent business transactions.

"(Former Soviet Union) actors often transfer their capital via Latvia, frequently through complex and interconnected legal structures, to various banking locales in order to reduce scrutiny of transactions and lower the transactions' risk rating."

In a separate development, Latvia's anti-corruption authority said it had detained central bank governor Ilmars Rimsevics, an ECB policymaker, over the weekend for demanding a bribe.

It said its investigation was not connected to the probe into ABLV.

"(Rimsevics' arrest)... is about demanding a bribe of no less than 100,000 euros," Jekabs Straume, the head of Latvia's Corruption Prevention and Combating Bureau told reporters at a news conference.

Rimsevics' lawyer said the central bank governor rejected the allegations made by the anti-corruption authority.

"But they (the allegations) have been expressed only orally, so we have not seen a specific document at the moment," Saulvedis Varpins said.

Neither the police nor the anti-corruption authority gave details of the alleged request for a bribe.

Latvia's government increased pressure on the central bank boss to quit.

"I can't imagine that a governor of the Bank of Latvia detained over such a serious accusation could work," Prime Minister Maris Kucinskis said on Monday.

After joining the European Union in 2003, Latvia adopted the euro as its currency at the start of 2014, a move which gave its central bank governor a seat on the currency bloc's top policymaking council.

Rimsevics was arrested on Saturday after police searched his office and home. He can be held for 48 hours, a period which is due to expire late on Monday.

The European Commission said on Monday that Rimsevics' detention was a matter for Latvian authorities. (Reporting by Gederts Gelzis in RIGA and Balazs Koranyi in FRANKFURT; Additional reporting by Simon Johnson in STOCKHOLM, Silvia Aloisi in LONDON and Jan Strupczewski and Alissa de Carbonne in BRUSSELS; Editing by Toby Chopra) </s> Latvia's central-bank chief has been released from custody on bail hours after the Baltic country's anticorruption agency accused him of receiving at least 100,000 euros ($125,000) in bribes.

The Corruption Prevention and Combating Bureau (KNAB) said on February 19 that no formal charges had been filed against Bank of Latvia Governor Ilmars Rimsevics, who was detained by police over the weekend.

Hours after the statement, the Delfi news portal showed video of Rimsevics leaving KNAB premises in Riga with his lawyer.

"I categorically disagree with [the charges]," Rimsevics said in the video to reporters at the scene.

Despite the denial of wrongdoing, Prime Minister Maris Kucinskis has called on Rimsevics to recuse himself from his duties while a criminal investigation against him is carried out.

Rimsevics has held the post since 2001 and is also a member of the European Central Bank's (ECB) governing council.

Latvia is a European Union member and uses the euro as its currency.

KNAB did not elaborate on the charges against Rimsevics, but AP reported on February 19 that executives at Latvian bank Norvik said the central-bank chief sought to extort money from their firm for years.

According to the news agency, Norvik has filed an international complaint against Latvia in which it claims a "senior Latvian official" sought bribes from the bank and abused his power. Norvik's CEO, Oliver Bramwell, told AP, "The high-level official mentioned in our request for arbitration is Rimsevics."

Latvia's financial sector is in upheaval with the investigation and a crisis at ABLV Bank, the country's third-largest bank by assets.

Latvia's financial regulator has ordered the bank to cease all payments after its liquidity position deteriorated sharply amid U.S. accusations of money laundering and breaching sanctions aimed at thwarting North Korea's weapons program.

The Treasury Department said in a statement last week that ABLV also facilitated transactions linked to "large-scale illicit activity connected to Azerbaijan, Russia, and Ukraine."

To shore up ABLV's finances, the central bank has said that it will loan the bank 97.5 million euros ($121 million) against "a reliable pledge of highly liquid securities."

With reporting by AP, Reuters, and Bloomberg </s> The European Central Bank (ECB) stopped all payments by one of Latvia's largest lenders on Monday, after its liquidity position collapsed in the wake of allegations from U.S. authorities.



The ECB requested Latvia's banking supervisor impose a moratorium on ABLV bank, the small Baltic nation's third-largest lender, in order to freeze all payments by the bank on its liabilities.

"In recent days, there has been a sharp deterioration of the bank's financial position," the ECB said in a statement Monday.

"A moratorium was considered necessary given that the bank is working with the Latvian central bank and authorities to address the current situation." </s> The European Central Bank and Governing Council member Ilmars Rimsevics accused Latvia of infringing central-bank independence by barring him from his post amid a probe into bribery accusations that he denies.

The Frankfurt-based ECB and the governor of Latvia’s central bank have both appealed at the EU’s highest court against restrictions that stop Rimsevics from exercising his office. The EU Court of Justice released details on the cases on Monday.

The Baltic country’s banking sector was rocked in February when the U.S. Treasury proposed banning the country’s third-biggest lender, ABLV, and days later Rimsevics was detained by the anti-corruption bureau for 48 hours. He was accused of being part of a group that solicited and received bribes of at least 100,000 euros ($119,340). The bank and Rimsevics deny all accusations of wrongdoing.

The ECB claims that Latvian authorities broke the law by imposing stringent bail terms on Rimsevics’ work before a ruling on the case by an independent court, the case summary shows. The ECB also says the authorities haven’t provided all the information on the case.

In a separate filing, the Latvian governor said he has been “unlawfully” prevented from carrying out his role. EU law states that central bank heads can only be removed if they can no longer perform their duties or if found guilty of “serious misconduct.”

Spokesmen for the ECB and Latvia’s anti-corruption bureau declined to comment. Rimsevics’s lawyer Saulvedis Varpins wasn’t immediately able to comment, and Latvian Prime Minister Maris Kucinskis’s spokesman Andrejs Vaivars didn’t immediately respond to a request for comment.

The ECB’s concerns “are very understandable, but I think just as understandable will be our answers,” the prime minister said in an interview with LTV on April 10. “I’m convinced that justice is on our side.”

Rimsevics, still officially a member of the ECB’s Governing Council, is barred from exiting the country and can’t even appoint a substitute. That means Latvia -- a euro-area member since 2014 -- has been unable to have a formal say on policy decisions since February. Deputy Governor Zoja Razmusa has attended as an observer at the meetings, where decisions are usually taken by consensus.

Ironically, the Governing Council will hold its next meeting in Riga, Latvia’s capital, on June 14. That could be a critical session as policy makers are expected to start debating how and when to end their 2.6 trillion-euro bond-buying program.

The ECJ has been asked by the ECB to issue an interim ruling that could soften the governor’s restrictions as early as this week.

Also on Monday, ABLV announced it had appealed at the Luxembourg-based EU court against the ECB’s decision to declare it was on the verge of failure. The bank was then closed under Latvian law after the EU bank-resolution authority said the lender was too small to warrant a rescue.

“ABLV and its Luxembourg subsidiary were neither illiquid nor was their illiquidity imminent in the foreseeable future,” the bank said in a statement announcing the filing of the case. They were “in an extraordinarily strong financial position not only as regards their capitalization and profitability but also and particularly as regards their liquidity.”
Latvian bank ABLV sues the European Central Bank in the Court of Justice of the European Union, saying the ECB triggered ABLV's collapse. The bank failed following allegations by the United States that ABLV was laundering money on behalf of North Korea.