The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced on Tuesday that it is proposing the designation of a Latvian bank which dealt with North Korea as primary money laundering concern.
The issuance of a notice of proposed rulemaking (NPRM) follows FinCEN’s findings that ABLV Bank – based in Riga, Latvia – has facilitated transactions on behalf of UN and U.S. sanctioned North Korean entities and financial institutions.
The action is pursuant to the Fifth Measure of Section 311 of the USA PATRIOT Act.
“Deficient practices at banks foster a wide array of illicit conduct, including activity linked to North Korea’s weapons program and corruption connected to Russia and Ukraine,” Secretary of the Treasury Steven T. Mnuchin said in an accompanying press release.
The ABLV Bank’s executives, according to FinCEN, “institutionalized money laundering as a pillar of the bank’s business practices,” and made it easier for sanctioned DPRK entities to use shell companies and financial representatives.
“ABLV’s business practice of banking high-risk shell companies without appropriate risk mitigation policies and procedures has also caused the bank to facilitate transactions for parties connected to U.S. and UN-designated Democratic People’s Republic of Korea (DPRK or North Korea) entities,” the NPRM reads.
This includes North Korea’s Foreign Trade Bank (FTB), Koryo Bank, Koryo Credit Development Bank, Korea Mining and Development Trading Corporation (KOMID), and Ocean Maritime Management Company (OMM).
ABLV continued the business, despite public warnings and increasing pressure by the U.S. regarding financial institutions providing the DPRK access to the U.S. financial system.
“ABLV facilitated transactions related to North Korea after the bank’s summer 2017 announcement of a North Korea “No Tolerance” policy,” FinCEN’s proposal read on Tuesday.
“The Treasury action reinforces that financial institutions that aid North Korea’s sanctions evasion risk losing their access to the U.S. financial system,” Anthony Ruggiero, a Senior Fellow at Foundation for Defense of Democracies told NK News.
“The action should serve as a warning and prompt other financial institutions to ensure they are not also aiding North Korea.”
The FinCEN notice echoes measures taken by the U.S. to designate the Bank of Dandong as a bank of primary money laundering concern in 2017.
On that occasion, FinCEN filed an NPRM against the Bank of Dandong in July and it subsequently made a final ruling on November 3 enforcing the proposal and severing the institution from the U.S. financial system.
The bank stood accused of facilitating transactions on behalf of entities sanctioned by the U.S. and UN, including the Korea Mining Development Trading Corporation (KOMID): one of North Korea’s primary arms dealers.
The U.S. also used the same measure against Banco Delta Asia in 2005.
Latvian financial institutions have been under pressure regarding the facilitation of payments for the DPRK recently while in July Latvia’s Financial and Capital Market Commission (FCMC) fined two local banks for due diligence failures allowing North Korea to procure items that facilitated its weapons programs.
The country’s financial watchdog fined Norvik Banka USD$1.5 million and Rietmu Banka USD$1.8 million for their weak due diligence and transaction monitoring.
Rietmu allowed transactions to occur for five years between 2009 and 2014, while Norvik Banka’s failures came between 2013 and 2014.
According to a Latvian sanctions implementation report dated December 2017, the Commission had identified “three Latvian banks which had not complied with the provisions of the regulatory framework on money-laundering and terrorism financing.”
It is unclear if this refers to Norvik Banka, Rietmu Banka, and ABLV Bank.
The report added that inspections had been carried out and the commission identified several occasions in which customers of those banks used offshore companies and chain transactions to “circumvent international sanctions requirements imposed against the Democratic People’s Republic of Korea.”
“Consequently, monetary fines were levied on the banks and an agreement was reached to improve the internal control systems of the banks with regard to money-laundering and terrorism financing,” it added.
ABLV Bank is able to challenge the proposal before a final rulemaking is reached. FinCEN received responses purportedly from the Bank of Dandong prior to the rulemaking decision in 2017.
FinCEN concluded, however, that “that the money laundering risks posed by Bank of Dandong have not been mitigated, and that it has not addressed concerns as described in the NPRM.”
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Featured Image: Stormy Riga by Alexander Annenkov on 2015-01-04 15:09:46