How Dirty Money is now flowing through different channels

Illicit funds are now flowing through new channels in Latvia following a major crackdown and reforms, the Baltic country’s FIU chief has revealed.

Despite strict measures imposed by the Latvian authorities to combat dirty money, it has emerged that the flow of these illicit funds still continues through new channels today.

In an interview, Ilze Znotina, director of the Latvian Financial Intelligence Unit (FIU) said: “Where are these flows now? They are definitely continuing to circulate in Europe and of course the world,” he told Bloomberg.

“We unfortunately have to start to think a lot more about different financial services, for example payment companies and e-money companies,” he said.

Following allegations of numerous failures in the country’s anti-money laundering framework, the country replaced its banking regulator, anti-money laundering watchdog and central bank governor.

It also moved to freeze suspect cash circulating, opened a number of criminal investigations and cracked down on shell companies.

Eyebrows were raised when it emerged that the US Treasury believed a Latvian lender was handling money for North Korean shell companies in 2018. That year, Latvian officials attempted to clean up its international image by clamping down on shell companies.

Latvia’s AML history is questionable, after investigations revealed that one of the Eurozone’s biggest banks, ABLV, was implicated in illicit activity in the country. Despite denying any involvement, the banking provider was shut down in 2018.

Before the ban on shell companies was instigated, the Latvian FIU estimated that over 26,000 were operating in the country. These shell companies are often used to hide the real owner of assets, thus making it increasingly difficult to source the origin of funds.

Many shell companies that operated in Latvia were believed to be from Russian customers, keen to obscure their business dealings. Reuters reported that authorities opened only 85 money laundering investigations in 2017, despite banks flagging 17,900 suspicious transactions.

Following the publication of the FinCen files in 2020, it emerged that numerous US banking providers with bases in Latvia filed a number of suspicious activity reports to the US Treasury Department.

The Bank of New York Mellon reportedly filed suspicious activity reports flagging $7.1 Billion that flowed through Latvia’s Regional Investment Bank over a nine year period between 2006 and 2015.

Similarly, the Bank of New York Mellon highlighted an eye-watering $29.2 Billion in suspicious transactions that flowed through the Latvian bank, Expobank, owned by Russian banking tycoon Igor Kim, over a ten year period.

European Commission Executive Vice President, Valdis Dombrovskis served as Prime Minister of Latvia between 2008 and 2014, and described how during his tenure the government “oversaw important reforms… to tackle money laundering and close loopholes”.

However, outspoken European Parliament MEP for the Green Party, Sven Giegold said that Latvia was “one of the dark holes for dirty money in Europe during the time Dombrovskis was Prime Minister”.

Latvia has been keen to clean up its international image as a hub for dirty money, and froze a record €429 Million euros in suspect funds in 2020.

Article credit: https://amlintelligence.com/2021/05/dirty-money-now-flows-through-different-channels-head-of-latvias-fiu/