International Trade Law News

Published by Jacobson Burton Kelley PLLC

The U.S. Department of the Treasury has designated two Latvian financial institutions, Multibanka and VEF Bank, as "primary money laundering concerns" under Section 311 of the USA PATRIOT Act for money-laundering activities and financial abuse. As a result of this designation, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) will publish a Notice of Proposed rulemaking in the Federal Register on April 26, 2005 that, when finalized, will prohibit U.S. financial institutions from establishing, maintaining, administering or managing any correspondent account in the U.S. for or on behalf of these two banks.

-- 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.

VEF, with headquarters in Riga, is one of the smallest of Latvia's 23 banks. It has one subsidiary, Veiksmes lîzings, 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.

To date, the Treasury Department has previously identified the following financial institutions as "primary money laundering concerns," pursuant to Section 311 of the USA PATRIOT Act:

-- 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.

Labels: FinCen