Published:  12:29 AM, 16 April 2018

Banking overhaul seeks to shut Latvian money laundromat

Banking overhaul seeks to shut Latvian money laundromat

Eurozone member Latvia is scrambling to reform its banking sector after US authorities accused its third largest lender of large-scale money laundering with connections to North Korea's nuclear weapons development programme.

Desperate to restore credibility, Riga is eliminating deposits in US dollars, cracking down on dealings with shell companies that may be used to facilitate money laundering and setting limits on the number of non-resident depositors that banks can serve.

Latvia's "boutique banking" sector has long sold itself to foreigners as a gateway to the European Union, with 11 of Latvia's 23 registered commercial banks catering to non-residents. A lucrative sector, exports of financial services brought in 446 million euros ($475 million) in 2016.

But the dream of the Baltic state of 1.9 million people to become a regional financial hub turned into a nightmare after authorities shrugged off repeated calls by international organisations such as the IMF and OECD that it needed to tighten banking regulations to prevent it being used for money laundering by foreign clients, the vast majority of which hailed from Russia and other countries from the former Soviet Union.

The US allegations against ABLV Bank were a rude wake up call that has stirred the nation's authorities into curbing the practices which landed the bank, Latvia's third largest bank despite having few local clients, in trouble and prompted its liquidation in February, Shell companies are the first on the chopping block. Latvian bank depositors own more than 26,000 of them according to Peteris Putnins, head of Latvia's Financial and Capital Markets Commi-ssion (FCMC).

-AFP, Riga


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