Latvia has launched a criminal case against the local unit of Ukraine's PrivatBank, local media reported on February 5.
The action by the Latvian economic crimes police unit is connected with the high profile case concerning the siphoning of a billion dollars from Moldova, Interfax Ukraine reports. The scandal, which involved Latvian and Russian banks, has thrown the small southeastern European country into chaos.
In December, Latvian financial market regulator FKTK handed PrivatBank a record €2mn fine for its role in the scam. That was followed a few days later with hefty fines for individual board members, including Ukrainians Oleksandr Trubakov and Oleksandr Mekekechko. However, the police said that for the time being the case was not concentrated on any individual suspects.
The opening of the criminal case comes as FKTK is in the spotlight. The watchdog has attracted much criticism for failing to combat money laundering and corruption in the Latvian banking sector.
Latvian banks have gained notoriety for being a haven for shady money operations involving Russia and other CIS countries. Non resident deposits, mostly from the CIS, make up around half of all deposits in the Latvian system. Despite warnings from international institutions such as the OECD, Latvia's role as a money-laundering hub has been exacerbated by the ineffectiveness of FKTK, according to critics.
The pressure on FKTK, including from the US, led to the resignation of head Kristaps Zakulis last month. His deputy Peter Putnins is tipped to replace him, but some officials from the incoming government have openly expressed doubt whether Putnins can make the regulator any more efficient.
As if to counter these opinions, Putnins announced an audit into the Latvian banking sector. Putnins told Latvian Radio that all the country's 17 boutique banks – which are thought to be at the centre of money-laundering allegations - will undergo a stringent audit in line with US and EU practices and carried out by three reputable US companies, LSM reported.
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