How The ECB Helped A Tiny Latvian Bank Become A Haven For Drug Barons, Oligarchs, & North Korea

Of the many long-simmering scandals that have surfaced so far this year, the story of the collapse of an obscure Latvian bank after its history of aiding the world's criminals was laid bare by the Treasury, which imposed sanctions against the bank on Feb. 13, precipitating its collapse.

A month after the chief of the country's central bank - also an ECB governing council member - was arrested by anti-corruption authorities on suspicion of accepting a bribe worth more than 100,000 euros, triggering a banking crisis in the tiny post-Soviet state, the Wall Street Journal has published a comprehensive account of how ABLV emerged following the collapse of the Soviet Union and developed into a haven for criminals trying to move illicit money into and out of Europe.


So as not to understate the threat posed by the bank, WSJ explains how rare it is for the Treasury Department to pursue sanctions against a fellow NATO member.

ABLV, Latvia’s third-largest lender by assets, is based in Riga but has an office in Luxembourg and a subsidiary in the U.S. It is also supervised directly by the ECB under a new system of eurozone bank supervision introduced during the region’s recent financial crisis, under which national authorities remain responsible for enforcing money-laundering laws.

That the U.S. invoked a rare sanction in a fellow NATO member-country shows the scale of the threat it perceives from this small corner of the European Union. A parade of American diplomats have visited Latvia in recent years saying that lax regulation allowed criminal or sanctioned entities to sneak ill-gotten fortunes into Europe.

"It’s a national security issue," U.S. Deputy Secretary of State John Sullivan told Latvian reporters in February, during a visit to Riga days after the U.S. sanctioned ABLV. "Security threats can take many forms, including corruption and efforts to undermine the integrity of the financial system," he said.

ABLV is accused of working with shell companies linked to North Korea's nuclear weapons program, as well as functioning as a clearinghouse for the ill-gotten fortunes of post-Soviet kleptocrats.

Before it collapsed, the bank denied the charges with its last gasp, saying they were "inaccurate in important respects" and pledged to work "quickly and cooperatively with US regulators to resolve their concerns." Of course, that's not happening; instead the ECB has opted to dissolve the bank.

And the ECB should handle it, because it's a problem that was inadvertently created by the EU when it deliberately ignored flagrant AML vulnerabilities endemic to Latvia's banking system when it was evaluating the Baltic state for EU membership, which Latvia received in 2004.

In 1998, as the EU was becoming a cogent force, Latvia created a regulator to combat money laundering, knowing it would be a membership requirement. The regulator set modest fines for money laundering: a maximum of €142,000 for the bank, and €350 for the employee involved, according to the Organization for Economic Cooperation and Development. Yet no national law explicitly banned opening bank accounts in fake names. Foreigners who'd never set foot in the country could open accounts with ease at foreign bank branches.

After a 2000 inspection lasting three days, an EU anti-money-laundering team vetting Latvia’s application to join the bloc praised the country for "a very comprehensive structure for the protection of the financial system." By the time Latvia joined the EU four years later, the assets held by its banks were slightly larger than the country’s entire economy thanks to a profusion of foreign business conducted mostly through anonymous shell companies. ABLV, whose founder was by now one of the country's richest men, set about trying to win clients in its post-Soviet neighbors. It was successful. And even its legitimate foreign customers generally sent their money to Latvia via third-party nations that allowed them to easily disguise the source. Soon, more than 80% of the bank’s clients were based outside of Latvia, with nearly 90% using shell companies, according to the country’s Financial Intelligence Unit.

Still, bankers insisted they possessed the tools to root out money laundering.

In an interview in February, ABLV’s Chief Executive Vadims Reinfelds said the bank believed it had the cultural know-how to separate criminal clients from the ones who merely wanted to legally get their money out of Russia. "We know when Russians are lying," he said. He added that "there is no recommendation that we have not combat money laundering," he said.

ABLV became a correspondent bank for 49 lenders, including Deutsche Bank and JPMorgan, opening a secure path to the West for its clients. In 2001, the bank helped a Colombian cocaine baron move $697,000, according to U.S. prosecutors charging the Colombian man. The bank says it couldn’t have known the transfer was connected to criminal activity. Later, authorities uncovered a child pornography ring that routed money through the bank.

All the while, the EU praised the country's banking standards, even as the US became increasingly wary.

A 2004 report found Latvia compliant with all EU anti-money laundering standards, as US intelligence agencies warned about possible links with North Korea.

In 2004, shortly after Latvia joined NATO, the US offered the country military aid, but insisted that Latvia allow US auditors to examine the country's banks.


Daniel Glaser, then the U.S. Treasury’s No. 2 terror-finance official, flew to Riga to oversee the work. In 2005, he declared two Latvian banks money launderers, and restricted them from dealing with American banks. Still, that didn't put a stop to the problem.

At this point, Latvian banks were reporting tens of thousands of suspicious transactions a year. Regulators could barely afford to follow up on a fraction of those. By this time, the European banking crisis was in full swing, and regulators shifted their attention away from money laundering.

That only encouraged the problem to fester.

In one incident, a US probe into a Ukrainian gas tycoon allied with former President Yanukovich prompted ABLV to drop the client.

The bank said it had hired 109 anti-money-laundering specialists to sift through its client list by 2017, and trimmed a fifth of its customers by the end of that year. It also hired Glaser to review its  finances, and declared a "zero tolerance" policy toward North Korea.

But that wasn't enough to stop the US from dropping the hammer.

Latvia’s regulators tried to keep the bank afloat, and spent days considering a $590 million emergency loan. But the ECB announced that ABLV would be liquidated. Most depositors will receive no more than €100,000.

The fallout from the scandal is hardly over. Prosecutors are looking into claims of extortion and bribery involving local officials. Meanwhile, the country's prime minister continues to nervously reassure his constituents that the country isn't vulnerable to a banking crisis, following a series of vicious bank runs.

For now, at least, the house of cards that is the country's banking system remains intact.


GUS100CORRINA 07564111 Tue, 03/27/2018 - 22:08 Permalink

How The ECB Helped A Tiny Latvian Bank Become A Haven For Drug Barons, Oligarchs, & North Korea

My response: TYRANNICAL LAWLESSNESS as far as the eye can see in the GLOBAL Theater. 

See what happens when you throw GOD out of the public square and Jesus Christ under the BUS?

The result: ALL HELL BREAKS LOOSE where CORRUPTION and EVIL become the normal mode of operation. Mankind's heart is deceitful above all else and desperately wicked! Just ask George "SHITHEAD" SOROS and CLINTON if you don't believe me.

And, according to Q from the Q-ANON postings, we HAVE NOT SEEN ANYTHING YET!!! Just wait till the HUMAN TRAFFICKING and PEDIFILE information is released. Q has hinted that it is so bad that only 40% of the total information can be shared because people will not believe the TRUTH.

In reply to by 07564111

DemandSider 07564111 Wed, 03/28/2018 - 02:03 Permalink

Economist and ex-Chase employee Michael Hudson, who once fired Greenspan for gross incompetence, explains Latvia's role in laundering dollars for FIRE sector parasites and The Department of Offense very succinctly in this video, which may explain why the neoliberal media ignores him.


"Laundering Havens for War Budgets"


Latvia, FIRE sector paradise!

"Demographers warn that on current trends, a population of two million could fall to 1.3 million by mid-century as more Latvians emigrate within Europe and fewer babies are born at home."…




P.S. Read this zerohedge article fast; it won't be around long.



In reply to by 07564111

navy62802 Tue, 03/27/2018 - 21:26 Permalink

This is how the covert, unelected global governance works. They create loopholes for themselves on a global scale so that they can do whatever they want ... drug trafficking, assassinations, government overthrows (typically small-scale), you name it. The fascists who truly control shit want to expand their control, and they will stop at nothing to do so. That's why we have the 2nd Amendment in the United States. That's why the Founding Fathers of the United States decided hundreds of years ago to arm every man, woman, and child. Because the level of evil in the world that constantly seeks to make you a slave is only able to be defeated by a populace that can win a total war. One in which even the children are armed to the fucking teeth.

WTFUD Tue, 03/27/2018 - 22:07 Permalink

Are we talking the same Latvia, who're Vichy DC's bestest EU vassal, convinced that Russia are ready to invade and overthrow them?

Davidduke2000 Tue, 03/27/2018 - 22:39 Permalink

the poor baltic states will lose their population because they do not have real economies and are into crimes and shenanigans.

They will beg Russia to take them back but unfortunately for them , there won't have another chance, they will be abandoned by the eu eventually.

waist-down-naked Wed, 03/28/2018 - 05:06 Permalink

The closed bank had a direct competitor, American owned. The scandal is made-up to promote specific interests. That explains most everything. Because there is no case for this idiocy. According to Basel AML Index 2017 Latvia is 14th most transparent among 146 countries surveyed. 

temporarity Wed, 03/28/2018 - 10:00 Permalink

..but, but.. there were no evidence shown from US Treasury side. The bank was solvent. I heard there's a difference how EU and USA applies "tied to Korea" rule. For EU it has to be direct relationship, but for USA it's violated at any point of chain. Also, no evidence have been shown so far for charges against Latvian national bank director.