Latvia: European Central Bank Revokes Trasta Komercbanka License

Published: 05 March 2016


By Stella Roque

The Latvian Financial and Capital Market Commission (FKTK) said Thursday that the European Central Bank (ECB) has revoked Trasta Komercbanka’s license effective immediately.

Latvian regulators said they sought the revocation because “the bank [has long] committed serious violations on a number of important activities.”

Cyprus has also followed the ECB's lead and withdrew the license of the bank's Cyprus branch, according to a news release by the Central Bank of Cyprus

Earlier this year, the FKTK barred the bank from carrying out debit transactions in any currency, including through online banking, ATMs, and by cash to customers for any amount in excess of € 100,000 (US$ 109,800).

It said the bank was unable to increase its share capital and lacked proper internal controls and action strategies. Two of its major shareholders, Igor Buimister and Ivan Fursin, were unable to “fulfil their obligations to the bank,” according to the regulators.

The FKTK said this week it has also identified ongoing shortcomings with the bank’s operations regarding prevention of money laundering and terrorist financing.

OCCRP reported in its investigation that Trasta Komercbanka was the European destination for billions of dollars siphoned out of Russia.

According to that report, a series of companies and banks funneled money to Trasta Komercbanka via a complicated paper trail. This was the pattern: A company would default on a loan, leaving a Russian company (or companies) and a Moldovan citizen liable for the debt. Moldovan courts would certify the debt obligation, using fake or incomplete documents, and order the Russian company to pay. The court sanction allowed stolen money to legally enter the European Union (EU) via Trasta Komercbanka.

Trasta Komercbanka was also one of the six Latvian banks used in the Sergei Magnitsky case where a criminal group executed a US$ 230 million tax fraud on Hermitage Capital Management and spirited the stolen money out of Russia.

The FKTK said Thursday that it had also considered whether the bank could be rescued based on European Union and Latvian laws, but had decided it could not meet the necessary criteria.

According to the regulators, Trasta Komercbanka’s exit from the market will have no significant negative impact on the Latvian financial sector’s stability and, if it is liquidated, the Latvian government will reimburse all depositors up to € 100,000 (US$ 109,800). Regulators said rescuing the bank or settling with it “was not in the public interest.”