Banks, Financial Services, Latvia, Legislation

PrivatBank had appealed the regulator's November 25, 2015 decision to order the bank to replace its board, and the December 11, 2015 decision to slap a EUR 2,016,830 fine on the bank.

"By signing the administrative agreement, both parties agreed to end the legal dispute. The agreement envisages further measures the bank has committed to taking within a timeframe set by the FCMC to improve its internal control system for the prevention of money laundering and terrorist financing and increase its efficiency," said FCMC representative Agnese Licite.

The settlement agreement, however, does not invalidate the FCMC's rulings and other legal obligations the bank is expected to meet. PrivatBank has already dismissed its previous board and paid the fine, as well as started work to improve its internal control system for the prevention of money laundering and terrorist financing.

Licite said that the FCMC is now analyzing information provided by PrivatBank about the measures that have been taken already to enhance the prevention of money laundering and terrorist financing.

The banking regulator in late November instructed PrivatBank to replace its board and in December also slapped a EUR 2 million fine on the bank.

The FCMC said at the time it had decided to impose a fine of EUR 2.017 million on PrivatBank for violating a number of regulations. The watchdog also demanded suspension of the bank's board chairman, Olexandr Trubakov, and a board member, Iveta Kerpe, and told PrivatBank to replace the entire board.

These penalties were slapped on PrivatBank as a result of the inspection carried out by the FCMC following the so-called Kroll Report that was commissioned by the Moldovan central bank to examine banking transactions between 2012 and 2014. The inspection established violations in screening of customers, documenting of information and monitoring of the customers' transactions. The bank had failed to identify several transactions as suspicious and report them to the Anti Money Laundering Service, the watchdog said.

PrivatBank disagreed with the regulator's conclusions which it called erroneous and said it would take steps to clear itself of the accusations.

The FCMC also slapped individual fines on all board members of PrivatBank. The decision about individual fines was made because the board members had for a long time permitted numerous large transactions in violation of several regulations. As a result, the bank was involved in the transactions that have created for it increased risks of [the loss of] reputation, money laundering and terrorism financing.

PrivatBank is the 11th largest bank in Latvia in terms of assets at the end of September 2015, according to the information from the Latvian Association of Commercial Banks.

Ukraine's PrivatBank is a key shareholder of Latvia's PrivatBank.