Banks, EU – Baltic States, Financial Services, Latvia, Legislation

worth EUR 20 million after it was hit with a heavy fine over a money-laundering scheme in France, the bank said in its unaudited 2017 report, cites LETA.

According to the report, Rietumu Banka was charged in France with involvement in aggravated tax fraud and money laundering. On July 6, 2017, a Paris court slapped an EUR 80 million fine on the Latvian bank and also ordered more than 20 defendants in the case to pay EUR 10.113 million in a shared fine as part of a civil lawsuit.

On July 12, 2017, Rietumu Banka lodged an appeal against that ruling, but the date for hearing that appeal has yet to be announced.

The bank’s management says in the report that the EUR 90.113 million fine is unreasonably large.

Rietumu Banka expects legal proceedings in this case to continue both in France and Latvia for two or three more years, or even longer. Although the bank is determined to defend its position, it has also put aside EUR 20 million in case it cannot avoid the sanctions.

The bank’s representatives said that a stress test, which was based on an assumption that the outcome of the court case is unfavorable to Rietumu Banka, showed that a loss of EUR 90.113 million would still leave the bank and its group with sufficient capital adequacy and liquidity.

“The bank will continue to collaborate with all the authorities,” the management said.

As reported, a Paris court in July 6, 2017, fined Rietumu Banka EUR 80 million (USD 91 million) Thursday for facilitating a scam to "democratize" tax evasion among ordinary taxpayers and small businesses in France. The bank’s president Aleksandrs Pankovs and Sergejs Scuks, the head of the Rietumu Banka representation in France, received suspended sentences, and Rietumu Banka was banned from doing business in France for five years.

Investigators suspect Rietumu Banka of helping to launder up to EUR 850 million euros (USD 964 million) from 2007 to 2012 with the complicity of a French financier, Nadav Bensoussan, and his company, France Offshore. Bensoussan, who once promised "tax haven for all," was sentenced to serve two years in prison and to pay a 3-million-euro (USD 3.4 million) fine. The court said the defendants organized "large-scale" tax evasion through offshore companies located in tax havens.

Rietumu Banka closed 2017 with a profit of EUR 33.034 million, which is 2.4 times less than in 2016, according to the unaudited annual financial statements. The profit of Rietumu Group last year shrank 2.5 times year-on-year to EUR 33.494 million. The bank expects to receive auditors’ report in April.

At the end of 2017, Rietumu Banka was the fifth largest bank in Latvia by assets.