The U.S. Department of the Treasury today utilized USA PATRIOT Act powers to designate two Latvian financial institutions as primary money laundering concerns. Multibanka and VEF Bank were named pursuant to Section 311 of the Act for money laundering activities and financial abuse by account holders and owners.
The Treasury has judiciously and strategically utilized the power of Section 311 to isolate rogue actors that present money laundering concerns and risks to the U.S. financial sector, said Treasury Secretary John W. Snow. Our use of this authority also alerts our global counterparts of specific concerns about real threats to the integrity of the international financial system.
In conjunction with this designation, Treasury's Financial Crimes Enforcement Network (FinCEN) issued proposed rules that when made final will prohibit U.S. financial institutions from establishing, maintaining, administering or managing any correspondent account in the United States for or on behalf of these two banks.
These two Latvian banks represent a danger to the international community because they facilitate the placement and movement of dirty money in the global financial system, said Daniel Glaser, the Treasury's Deputy Assistant Secretary for Terrorist Financing and Financial Crimes. We will continue to work closely with the Latvian government to crack down on crimes in their financial sector.
Headquartered in Riga, Multibanka is the oldest commercial bank in Latvia and is among the smaller of Latvia's 23 banks. Multibanka has four foreign offices (Russia, Ukraine and Belarus), five domestic branches and one leasing subsidiary called Multilizings. The Notice of Proposed Rulemaking issued today identifies several reasons for the designation of Multibanka as a primary money laundering concern:
- Multibanka offers confidential banking services and numbered accounts for non-Latvian customers. Reports substantiate that a significant portion of its business involves wiring money out of the country on behalf of its accountholders.
- Information available to the U.S. Government shows Multibanka has been used by Russian and other shell companies to facilitate financial crime by allowing criminals to disguise illegal proceeds in countries known for lax enforcement of anti-money laundering laws.
- According to information available to the U.S. Government, certain criminals use accounts at Multibanka to facilitate financial fraud schemes. Specifically, an individual involved in financial fraud reported carrying out large sum transactions through his account at Multibanka. In addition, an individual arrested in 2004 for his involvement in an access device fraud ring used an account at Multibanka to launder proceeds of his criminal activities.
Headquartered in Riga, VEF is one of the smallest of Latvia's 23 banks. It has one subsidiary, Veiksmes lzings, which offers financial leasing and factoring services. In addition to its headquarters in Riga, VEF has one branch in Riga, and one representative office in the Czech Republic. The Notice of Proposed Rulemaking issued today identifies several reasons for the designation of VEF Bank as a primary money laundering concern:
- VEF Bank lacks adequate controls and procedures to detect and combat money laundering. These deficiencies, coupled with the bank's dealings with foreign shell companies and provision of confidential banking services, make VEF vulnerable to money laundering and other financial crimes.
- VEF Bank offers confidential banking services for non-Latvian customers. Less than 20 percent of these deposits are from individuals or companies located in Latvia, an indicator that a bank may be used to launder money.
Title III of the USA PATRIOT Act amends the anti-money laundering provisions of the Bank Secrecy Act (BSA) to promote the prevention, detection and prosecution of international money laundering and the financing of terrorism. Section 311 authorizes the Secretary of the Treasury in consultation with the Departments of Justice and State and appropriate Federal financial regulators to designate a foreign jurisdiction, institution, class of transactions or type of account to be of primary money laundering concern and to require U.S. financial institutions to take certain special measures against the designee.
These special measures range from enhanced recordkeeping or reporting obligations to a requirement to terminate correspondent banking relationships with the designated entity. The measures are meant to provide Treasury with a range of options to most effectively target specific money laundering and terrorist financing.
The Treasury Department has previously identified the following financial institutions as primary money laundering concerns, pursuant to Section 311:
- The First Merchant Bank of the Turkish Republic of Northern Cyprus (TRNC) and Infobank of Belarus in August 2004;
- The Commercial Bank of Syria and its subsidiary Syrian Lebanese Commercial Bank in May 2004; and
- Myanmar Mayflower Bank and Asia Wealth Bank in November 2003.
The Bush Administration has also taken action, pursuant to Section 311, against the foreign jurisdictions of Burma, Nauru and the Ukraine. The designation of the Ukraine was lifted after Ukrainian authorities took subsequent and aggressive steps to address the concerns and risks identified in the 311 action.