DIE GRÜNEN | EFA im Europäischen Parlament Sven Giegold Am 25. Mai:Grün für ein besseres Europa

Latvian money laundering scandal: Greens call for supervisory and legislative consequences


The Greens in the European Parliament have sent a series of written questions to the European Central Bank, the Single Resolution Mechanism, the European Banking Authority and the European Commission. The questions follow the failure of the Latvian bank ABLV some weeks ago. The information on the bank’s financial crime had to be uncovered by US authorities although the bank was under direct supervision of the ECB. We ask these questions to shed light on the operational and legislative problems encountered during the recent crisis.

Sven Giegold, economic and financial spokesperson of the Greens/EFA group and member of the banking union working group of the European Parliament:

„The failure of the Latvian ABLV bank must have supervisory and legislative consequences. The crisis of ABLV has uncovered serious shortcomings of the functioning of the banking union.

The ECB has too little competence in supervising risks from financial crimes. Bad national enforcement of anti-money-laundering legislation can put the banking union into disrespect. It is high time to ensure that no bank in the Eurozone basis its business model on allowing financial crimes. Europe has to put its house in order, without help of the United States. We cannot afford another money laundering scandal.

After the resolution trouble with Banco Popular this is the second failure to function smoothly during a crisis situation. The responsibilities of national and European institutions have to be clarified. National legislation for banking resolutions and insolvencies has to be harmonized further.“

Our questions can be found here: https://sven-giegold.de/2018-03-13-wqs-latvia-compressed/

Written Questions on Latvia/Money laundering

Question to the EBA

There is a general obligation under Article 6 (2) of the SSM Regulation that national competent authorities have to share all their information with the ECB. For its Fit & Proper assessments, the ECB has to have access to detailed information on board members in all EU countries including convictions or ongoing prosecutions for a criminal offence. Joint ESMA and EBA Guidelines clarify that also ongoing investigations regarding financial crime and money laundering should be considered when assessing reputation, honesty and integrity of board members. However, in practice, not all Member States comply with this requirement.

We would like to know which countries do not comply with the requirement to consider also ongoing investigations as stipulated in the Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU.

Question 1 to COM

Subject: Money laundering risks in Latvia

Before Latvia joined the Euro zone on 1 January 2014, it had promised in its commitment letter dated 18 June 2013 to align its anti-money laundering framework to the Fourth Anti-Money Laundering Directive (AMLD IV) and to also ensure practical enforcement of the regulatory framework.

We would like to ask what the Commission has done since the introduction to the euro to enforce Latvia’s commitment to combat potential money laundering through the Latvian financial sector. In particular, we would like to know the development over time of the number of administrative sanctions and measures applied to breaches on the part of obliged entities in accordance with Article 59 of AMLD IV as well as the number of bank accounts closed and assets frozen.

In the light of the money-laundering allegations against ABLV Bank Latvia, we would like to ask what consequences does the Commission draw from the fact that the mere announcement by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) of a draft measure to name ABLV Bank an institution of primary money laundering concern was sufficient for the solvent ABLV bank to lose access to US dollar funding through correspondent banks.

Question 2 to COM

Subject: Enforcement of European Anti-Money Laundering rules in the financial sector

According to Article 6 (2) of the SSM Regulation, national competent authorities have to share all their information with the ECB. Which actions has the Commission taken to ensure that the ECB is provided by national competent authorities with all information necessary for the purposes of carrying out the tasks conferred on the ECB by the SSM Regulation?

According to Article 18 and 67 (1) CRD IV, the SSM can withdraw the authorization of a bank when there is a serious breach of the national provisions adopted pursuant to the Anti-Money Laundering Directive. Nevertheless, some Member States have not defined in their national law what constitutes a serious breach. Which actions has the Commission taken to close this gap and what does the Commission intend to do in the future to remedy this situation?

Should national financial intelligence units (FIUs) not only have the right to share relevant information about breaches of national provisions adopted pursuant to the Anti-Money Laundering Directive with competent authorities but also an obligation to do so and does the Commission consider to take legislative actions or other initiatives towards such an obligation?

Question 1 to SSM

SUBJECT: Money laundering incidents in Latvia and Denmark

After the ECB had determined ABLV Bank as failing or likely to fail and the SRB had decided that resolution action was not in the public interest, the bank was wound up under the law of Latvia and Luxembourg. We would like to ask which difficulties, in particular regarding the division of competences between SSM, SRB and national competent authority, the SSM faced when deciding on the shutdown of the Latvian bank and its subsidiary in Luxembourg.

Given the decision of the shareholders of ABLV Bank to self-liquidate the Latvian bank and the pending court decision in Luxembourg whether to liquidate the subsidiary in Luxembourg, does the SSM agree that the triggers for liquidation in the national insolvency laws should be harmonized across all EU Member States?

More generally, in the light of the money-laundering allegations against ABLV Bank and Danske Bank, we would like to ask what consequences does the SSM draw in order to ensure that market participants strictly adhere to the regulatory framework in place.

Question 2 to SSM

SUBJECT: Information exchange regarding money laundering risks

According to Article 6 (2) of the SSM Regulation, national competent authorities have to share all their information with the ECB. Has the SSM encountered limits to the obligation of national competent authorities to provide the ECB with all information necessary for the purposes of carrying out the tasks conferred on the ECB by the SSM Regulation? If yes, which types of limits were experienced in the area of the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and consumer protection?

According to Article 18 and 67 (1) CRD IV, the SSM can withdraw a banking authorisation when it encounters a serious breach of the national provisions adopted pursuant to the Anti-Money Laundering Directive. We would like to know which Member States have defined in their national law what constitutes a serious breach and whether the SSM sees a need for harmonizing these definitions across the EU. Additionally, how can the SSM fulfil this function if it receives only limited information by the national authorities responsible for the enforcement of anti-money laundering and terrorist financing obligations and which changes does the SSM regard as necessary?

Question 3 to SSM

SUBJECT: Integration of money laundering risks in prudential supervision

The SSM Supervisory Manual seems to lack any provisions on financial crime, money laundering or terrorist financing. Does the SSM plan to strengthen the manual in these regards?

Does the SSM subsume financial crime under prudential risks and how does it include financial crime in its supervisory work? In particular, in how many cases did the SSM apply higher SREP Pillar 2 capital surcharges and denied or discarded the fulfilment of the fit and proper requirements due to financial crime risks? How many cases of credit institutions having committed serious breaches of the Anti-Money Laundering Directive is the SSM aware of? Please, detail the figures for each year on a country by country basis since the creation of the SSM.

The Latvian ABLV Bank and the Maltese Pilatus Bank seem to be based on a business model of charging their customers with relatively high fees while at the same time enforcing anti-money laundering rules less rigidly than other institutions. Does the SSM have indications that there are other credit institutions with similar business models and if yes, will the SSM examine the business models of all banks regarding their risk of money laundering and terrorist financing?

Question to SRM

Subject: Division of competences for deciding on a bank’s wind up

After the ECB had determined ABLV Bank as failing or likely to fail and the SRB had decided that resolution action was not in the public interest, the bank was wound up under the law of Latvia and Luxembourg.

We would like to ask which difficulties, in particular regarding the division of competences between SSM, SRB and national competent authority, the SRB faced when deciding on the wind up of the Latvian bank and its subsidiary in Luxembourg? In view of these difficulties, which consequences does the SRB draw in order to ensure that market participants can be easily wound up in the future?