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Newest target of U.S. sanctions is Latvian bank

Feb 15,2018
Washington is putting sanctions on Latvia’s ABLV Bank for money laundering and activities linked to North Korea’s nuclear and missile programs, announced the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on Tuesday.

“FinCEN will continue to take action against foreign banks that disregard anti-money laundering safeguards and become conduits for widespread illicit activity,” said U.S. Secretary of the Treasury Steven T. Mnuchin in a statement. “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.”

FinCEN seeks to prohibit the opening or maintaining of a correspondent account in the United States for the Riga-based ABLV Bank, the second-largest bank in Latvia by assets, severing it from the U.S. market.

It said ABLV has institutionalized money laundering “as a pillar of the bank’s business practices” and facilitated transactions for people or entities linked to organized crime, weapons proliferation, corruption and sanctions evasion.

FinCEN accused the bank of failing to implement anti-money laundering and combating the financing of terrorism rules, which enabled illicit financial activity including transactions for clients that are blacklisted by the United Nations Security Council, some involved in North Korea’s procurement or export of ballistic missiles.

ABLV Bank is also accused of funneling billions of dollars in public corruption and asset stripping proceeds through shell companies.

The bank’s illicit activities are connected to Azerbaijan, Russia and Ukraine, according to FinCEN.

This is a rare and powerful action and is considered part of Washington’s pressure campaign against both North Korea and Russia.

According to the FinCEN report, ABLV has facilitated transactions for North Korean banks sanctioned by the United Stated or United Nations including the Korea Mining and Development Trading Corporation (Komid), Ocean Maritime Management Company (OMM), Foreign Trade Bank, Koryo Bank as well as Koryo Credit Development Bank, some which are involved in the sale of ballistic missiles.

The Treasury has described Komid, which was blacklisted in 2015, as North Korea’s primary arms dealer, and OMM is a North Korean shipping company linked to illicit arms dealings.

According to this report, ABLV facilitated transactions linked to Pyongyang’s weapons program after the bank announced a “No Tolerance” policy toward North Korea last summer.

FinCEN has highlighted North Korea’s tendency to use front companies to evade U.S. and international sanctions and found it to be a foreign jurisdiction of “primary money laundering concern.”

The Treasury Department’s Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker described ABLV Bank as a primary money laundering concern at a Securities Industry and Financial Markets Association conference in New York Tuesday.

Mandelker said, “We have made clear to countries and companies around the world that they can choose to trade with North Korea or the United States, but not both.”

He added that in a recent visit to Beijing, he “highlighted the risks that banks there face because of the presence of North Korean bank and trade representatives in China,” indirectly warning of possible secondary sanctions on institutions that evade enforcement of sanctions.

He pointed out that in November, FinCEN issued an advisory to financial institutions “to highlight how North Korea disguises, moves, and launders funds to finance its nuclear and ballistic missile programs.”

In response, ABLV Bank said through a statement that the U.S. Treasury Department relied on “obviously unfounded and misleading information,” calling it “defamatory.”

It added, “ABLV Bank would like to point out that in its operation it is consistently obeying all and any Latvian and international, including European Union, laws and regulatory requirements” and that it has in recent years “put forth tremendous effort .?.?. specifically in money laundering and terrorism financing prevention, and sanctions risk management.”

The bank said it is contemplating filing a protest against FinCEN.

The bank has 60 days to submit written objections.

The bank has a subsidiary in Luxembourg and representative offices in cities including Russia’s Moscow and St. Petersburg, Ukraine’s Kiev and Hong Kong, and operates an advisory services office in the United States.

China’s Bank of Dandong was designated as a primary money laundering concern by the Treasury Department last June for facilitating transactions for companies involved in North Korea’s nuclear and missile programs.

BY SARAH KIM [kim.sarah@joongang.co.kr]