Proposed Rule2024-22299
Proposal of Special Measure Against ABLV Bank, AS as a Financial Institution of Primary Money Laundering Concern; Withdrawal
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Published
September 27, 2024
Issuing agencies
Treasury DepartmentFinancial Crimes Enforcement Network
Abstract
This document withdraws FinCEN's finding that ABLV Bank AS (ABLV) is a financial institution of primary money laundering concern and the related notice of proposed rulemaking seeking to impose the fifth special measure regarding ABLV, pursuant to section 311 of the USA PATRIOT Act (section 311). Because of material subsequent developments that have mitigated the money laundering risks associated with ABLV, FinCEN has determined ABLV is no longer a financial institution of primary money laundering concern that warrants the implementation of a special measure under section 311.
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<title>Federal Register, Volume 89 Issue 188 (Friday, September 27, 2024)</title>
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[Federal Register Volume 89, Number 188 (Friday, September 27, 2024)]
[Proposed Rules]
[Pages 79184-79186]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-22299]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB39
Proposal of Special Measure Against ABLV Bank, AS as a Financial
Institution of Primary Money Laundering Concern; Withdrawal
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Withdrawal of finding and notice of proposed rulemaking.
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SUMMARY: This document withdraws FinCEN's finding that ABLV Bank AS
(ABLV) is a financial institution of primary money laundering concern
and the related notice of proposed rulemaking seeking to impose the
fifth special measure regarding ABLV, pursuant to section 311 of the
USA PATRIOT Act (section 311). Because of material subsequent
developments that have mitigated the money laundering risks associated
with ABLV, FinCEN has determined ABLV is no longer a financial
institution of primary money laundering concern that warrants the
implementation of a special measure under section 311.
DATES: The finding and notice of proposed rulemaking, published at 83
FR 6986 (Feb. 16, 2018), are withdrawn as of September 27, 2024.
ADDRESSES: Mail: Global Investigations Division, Financial Crimes
Enforcement Network, P.O. Box 39, Vienna, VA 22183.
FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at 1-800-
767-2825 or electronically at <a href="/cdn-cgi/l/email-protection#deb8acbd9eb8b7b0bdbbb0f0b9b1a8"><span class="__cf_email__" data-cfemail="ddbbafbe9dbbb4b3beb8b3f3bab2ab">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
On October 26, 2001, the President signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (the
``USA PATRIOT Act''). Title III of the USA PATRIOT Act amended the
anti-money laundering provisions of the Bank Secrecy Act (BSA) \1\ to
promote the prevention, detection, and prosecution of international
money laundering and the financing of terrorism. Section 311 of the USA
PATRIOT Act (section 311), codified at 31 U.S.C. 5318A, grants the
Secretary of the Treasury (Secretary) authority, upon finding that
reasonable grounds exist for concluding that one or more financial
institutions operating outside the United State is of primary money
laundering concern, to require domestic financial institutions and
financial agencies to take certain ``special measures''. The authority
of the Secretary to administer the BSA and its implementing regulations
has been delegated to the Director of FinCEN.\2\
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\1\ The BSA, as amended, is the popular name for a collection of
statutory authorities that FinCEN administers that is codified at 12
U.S.C. 1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and
includes other authorities reflected in notes thereto. Regulations
implementing the BSA appear at 31 CFR chapter X.
\2\ Pursuant to Treasury Order 180-01, the authority of the
Secretary of the Treasury (Secretary) to administer the BSA,
including, but not limited to, 31 U.S.C. 5318A, has been delegated
to the Director of FinCEN. Treasury Order 180-01 (Jan. 14, 2020).
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The five special measures enumerated under section 311 are
safeguards that may be employed to defend the U.S. financial system
from money laundering and terrorist financing risks. The Secretary may
impose one or more of these special measures in order to protect the
U.S. financial system from such threats. Through special measures one
through four, the Secretary may impose additional recordkeeping,
information collection, and information reporting requirements on
covered domestic financial institutions and domestic financial
agencies--collectively, ``covered financial institutions''.\3\ Through
special measure five, to the Secretary may prohibit, or impose
conditions on, the opening or maintaining in the United States of
correspondent or payable-through accounts by covered financial
institutions.\4\
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\3\ 31 U.S.C. 5318A(b)(1)-(b)(4).
\4\ 31 U.S.C. 5318A(b)(5).
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II. Procedural History and Subsequent Events
A. Finding and Notice of Proposed Rulemaking
On February 16, 2018, FinCEN issued a notice of proposed rulemaking
(NPRM) that (1) set forth FinCEN's finding that ABLV, a commercial bank
located in Riga, Latvia, was, at that time, a foreign financial
institution of primary money laundering concern and (2) proposed
imposing special measure five under section 311, prohibiting covered
financial institutions from opening or maintaining in the United States
correspondent accounts for, or on behalf of, ABLV.\5\
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\5\ FinCEN, Proposal of Special Measure Against ABLV Bank, AS as
a Financial Institution of Primary Money Laundering Concern, 83 FR
6986 (Feb. 16, 2018), available at <a href="https://www.fincen.gov/sites/default/files/federal_register_notices/2018-02-16/2018-03214.pdf">https://www.fincen.gov/sites/default/files/federal_register_notices/2018-02-16/2018-03214.pdf</a>.
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B. Subsequent Developments
In light of significant developments since FinCEN issued that NPRM,
FinCEN has now determined that ABLV is no longer a financial
institution that is of primary money laundering concern.
1. ABLV Lost Its License, Ceased Banking Operations, and Is Undergoing
Irrevocable and Supervised Liquidation
On February 23, 2018 (one week after FinCEN issued its NPRM), the
European Central Bank (ECB) determined that ABLV--as well as its
subsidiary ABLV Bank Luxembourg--was failing or likely to fail, noting
that, following issuance of FinCEN's NPRM, ABLV had experienced an
abrupt wave of deposit withdrawals and increasing lack of access to
U.S. dollar funding.\6\ As a result, the ECB instructed the Latvian
supervisory authority, the then-named Financial and Capital Markets
Commission (FCMC),\7\ to impose a moratorium on ABLV in order to
provide the bank time to stabilize operations. A similar moratorium was
placed upon ABLV's subsidiary in Luxembourg.\8\ In addition, on July
11, 2018, ECB formally withdrew ABLV's banking license.\9\
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\6\ See ECB, Press Release, ECB determined ABLV Bank was failing
or likely to fail (Feb. 24, 2018), available at <a href="https://www.bankingsupervision.europa.eu/press/pr/date/2018/html/ssm.pr180224.en.html">https://www.bankingsupervision.europa.eu/press/pr/date/2018/html/ssm.pr180224.en.html</a>.
\7\ In January 2023, the FCMC was integrated into the Bank of
Latvia. Latvijas Banka, Press Release, As of 1 January, the FCMC
will be integrated into Latvijas Banka (Dec. 28, 2022), available at
<a href="https://www.bank.lv/en/news-and-events/news-and-articles/press-releases/16285-as-of-1-january-the-fcmc-will-be-integrated-into-latvijas-banka">https://www.bank.lv/en/news-and-events/news-and-articles/press-releases/16285-as-of-1-january-the-fcmc-will-be-integrated-into-latvijas-banka</a>.
\8\ See id.
\9\ See Nasdaq, ECB Withdraws Credit Institution's License of
ABLV Bank, AS in Liquidation (July 12, 2018), available at <a href="https://view.news.eu.nasdaq.com/view?id=bd5ccbdd7886f3040713f0c5eb9193353&lang=en">https://view.news.eu.nasdaq.com/view?id=bd5ccbdd7886f3040713f0c5eb9193353&lang=en</a>.
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As a consequence of the ECB's determination and subsequent action
by relevant national authorities, ABLV and its subsidiary began winding
up shortly afterwards. On June 12, 2018, ABLV--with the approval of
FCMC--entered irrevocable liquidation, formally changing its name to
ABLV Bank-in-Liquidation.\10\ By July 12, 2018, ABLV no longer operated
as a depository institution. On January 29, 2019, Luxembourg's main
financial regulatory authority, the Commission de Surveillance du
Secteur Financier (CSSF), issued a fine against ABLV Bank Luxembourg of
[euro]250,000, the maximum
[[Page 79185]]
allowable by law, on the finding that, inter alia, ABLV had failed to
comply with obligations established under Luxembourg's AML/CFT legal
requirements.\11\ Shortly afterward, the Luxembourg courts ordered ABLV
Bank Luxembourg dissolved.\12\
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\10\ See Reuters, Latvian bank regulator approves liquidation of
ABLV Bank (June 12, 2018), available at <a href="https://www.reuters.com/article/business/latvian-banking-regulator-approves-liquidation-of-ablv-bank-idUSKBN1J82E0/">https://www.reuters.com/article/business/latvian-banking-regulator-approves-liquidation-of-ablv-bank-idUSKBN1J82E0/</a>.
\11\ See CSSF, Administrative penalty imposed on the credit
institution ABLV Bank Luxembourg S.A. (Jan. 29, 2019).
\12\ See CSSF, Dissolution and judicial liquidation: ABLV Bank
Luxembourg S.A.--Appointment of liquidators (July 2, 2019).
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Significantly, since July 2018, ABLV-in-Liquidation has undergone a
strictly supervised liquidation process, closely monitored by the
Government of Latvia, which ensures AML/CFT compliance. Throughout the
process (which is at an advanced stage), Latvian authorities have kept
FinCEN apprised of ABLV's liquidation with updates on the authorities'
role in: (1) supervising the liquidation; (2) approving updates to the
liquidation methodologies for verifying creditors and ensuring AML/CFT
and sanctions compliance; (3) reviewing the liquidators' submitted
reports; and (4) monitoring ABLV creditors' claims.\13\
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\13\ Notably, Latvian authorities ultimately confirmed that,
having reviewed the bank's records, they found evidence to support
FinCEN's findings in the NPRM concerning the complicity of ABLV
owners, shareholders, and senior leadership in the use of the bank
for money laundering purposes.
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Further, under liquidation, ABLV has engaged in minimal ongoing
activity, continues to exist as a legal entity to solely conclude
liquidation, and is conducting, and subject to, ongoing efforts to
identify additional past illicit activity. Notably, the ongoing efforts
to identify additional past illicit activity--comprised of
administrative and criminal investigations by relevant Latvian
authorities into the activities of the bank and its shareholders--
underscore the gravity with which Latvian authorities are treating the
matter. Of note, those investigations have already resulted in criminal
charges against the owners and senior managers of ABLV,\14\ ensuring
that any potential future application for a bank license in Latvia or
other EU member states by these individuals would elicit the heightened
scrutiny established by the relevant EU rules.\15\
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\14\ OCCRP, Latvian Prosecutors Charge Bankers with Laundering
2.1B Euro (July 29, 2022), available at <a href="https://www.occrp.org/en/news/latvian-prosecutors-charge-bankers-with-laundering-21b-euro">https://www.occrp.org/en/news/latvian-prosecutors-charge-bankers-with-laundering-21b-euro</a>.
\15\ European Bank Authority, Final Report on Joint ESMA and EBA
Guidelines (July 2, 2021), pp. 38-40, available at <a href="https://www.eba.europa.eu/sites/default/files/document_library/Publications/Guidelines/2021/EBA-GL-2021-06%20Joint%20GLs%20on%20the%20assessment%20of%20suitability%20">https://www.eba.europa.eu/sites/default/files/document_library/Publications/Guidelines/2021/EBA-GL-2021-06%20Joint%20GLs%20on%20the%20assessment%20of%20suitability%20</a>(fit&pr
opoer)/1022127/
Final%20report%20on%20joint%20EBA%20and%20ESMA%20GL%20on%20the%20asse
ssment%20of%20suitability.pdf.
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Given the revocation of ABLV's licenses, significant efforts to
identify and address past illicit activity, and the advanced stage of
liquidation of ABLV, ABLV-in-Liquidation is no longer a financial
institution of primary money laundering concern.
2. Marked Systemic Improvements to the Latvian AML/CFT Regime and
Oversight
In parallel with targeted efforts relating to ABLV, the Government
of Latvia has also made notable progress with a series of meaningful
legal and regulatory reforms in its financial sector since issuance of
FinCEN's NPRM that have substantially reduced non-resident deposit
activity, a principal source of FinCEN's money laundering concern, and
strengthened both its AML/CFT authorities and institutional capacity.
In particular, in April 2018, the Government of Latvia took the first
of many actions to remediate AML/CFT regime weaknesses and compliance
failures by prohibiting most transactions with shell companies.\16\
Shortly afterwards, in November 2018, the Government of Latvia
reorganized the Financial Intelligence Unit (FIU) from under the
Prosecutor General's Office, granting the FIU independence and
autonomy.\17\ Finally, in 2019, the Government of Latvia adopted a
series of legal and regulatory reforms to its AML/CFT regime. Those
reforms extended the scope of the financial regulator--formerly the
FCMC, which was absorbed by the Bank of Latvia in January 2023 \18\--to
increase AML/CFT supervision in the financial and capital markets
sectors. The Government of Latvia also amended the Law on the
Prevention of Money Laundering and Terrorism and Proliferation
Financing in several ways, including: (1) introducing a fit-and-proper-
person test for banking senior management and compliance employees; (2)
requiring termination of the pending business relationship for any
customer who fails due diligence; (3) prohibiting the opening and
maintaining of anonymous accounts; (4) expanding the definition of
``beneficial ownership'' to include indirect control; (5) clarifying
Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements
through adding additional industries subject to KYC/CDD and introducing
ongoing monitoring and verification of source of wealth; (6) requiring
the State Revenue Service to provide information on politically exposed
persons, their relatives, and close associates; (7) mandating Enhanced
Due Diligence (EDD) for customers from high-risk jurisdictions; (8)
expanding requirements for suspicious transaction reports; and (9)
authorizing the FCMC (now Bank of Latvia) to revoke banking licenses or
otherwise suspend economic activity.\19\
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\16\ Cabinet of Ministers Republic of Latvia, Saeima Imposes the
Ban on Servicing Shell Companies (Apr. 27, 2018), available at
<a href="https://www.mk.gov.lv/en/article/saeima-imposes-ban-servicing-shell-companies">https://www.mk.gov.lv/en/article/saeima-imposes-ban-servicing-shell-companies</a>.
\17\ Office for Prevention of Laundering of Proceeds Derived
from Criminal Activity, Annual Report for 2018 (Mar. 31, 2019),
available at <a href="https://fid.gov.lv/uploads/files/English%20version/Annual_Report_2018_EN.pdf">https://fid.gov.lv/uploads/files/English%20version/Annual_Report_2018_EN.pdf</a>.
\18\ See supra note 7.
\19\ Cabinet of Ministers Republic of Latvia, Latvian Financial
Sector Update, No. 15 27 June 2019 (June 27, 2019), available at
<a href="https://www.mk.gov.lv/en/media/1678/download">https://www.mk.gov.lv/en/media/1678/download</a>.
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In 2021, the Government of Latvia implemented further changes to
its Law on the Prevention of Money Laundering and Terrorism and
Proliferation Financing, including: (1) expanding the scope of AML/CFT
regulations and oversight to cover additional types of businesses and
legal entities; (2) including real estate agents and brokers as
entities obligated to follow AML/CFT requirements; (3) requiring
continuous and ongoing training for those entities with AML/CFT
obligations; (4) requiring that beneficial owners cannot have been
convicted of international crimes or crimes against the state; (5)
expanding upon the risk assessment triggers used by financial
institutions; and (6) adopting new tools and software to assist with
due diligence and the filing for suspicious transaction reports.\20\
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\20\ Anti-Money Laundering and Terrorism and Proliferation
Financing Act, available at <a href="https://likumi.lv/ta/id/178987#p3">https://likumi.lv/ta/id/178987#p3</a>.
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The Government of Latvia and the ECB have also added additional
rules to assess the suitability of individuals to own or run a bank
(i.e., fit-and-proper person tests).\21\ These rules now consider
whether criminal charges have been filed against prospective bank
officials and owners, irrespective of final verdict, and how such
allegations might affect the bank's reputation.
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\21\ Regulation on the Assessment of the Suitability of the
Executive and Supervisory Board Members and Key Function Holders,
available at <a href="https://www.bank.lv/images/pielikumi/tiesibu-akti/Normativie_noteikumi_nr_94_ENG_Regulation_on_the_Assessment_of_the_Suitability_of_MB_KFH_FCMC_No94.pdf">https://www.bank.lv/images/pielikumi/tiesibu-akti/Normativie_noteikumi_nr_94_ENG_Regulation_on_the_Assessment_of_the_Suitability_of_MB_KFH_FCMC_No94.pdf</a>; ECB, Guide to fit and proper
assessments (Dec. 2021), pp. 14-22, available at https://
www.bankingsupervision.europa.eu/ecb/pub/pdf/
ssm.fit_and_proper_guide_update202112~d66f230eca.en.pdf.
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As a result of these and other efforts by the Government of Latvia,
the share of non-resident deposits in Latvia's financial sector--one of
the principal risk factors in Latvia's private sector that existed at
the time of publication of the
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NPRM--has decreased steadily from 2016 to the present.
III. Withdrawal of the Finding and NPRM
For the reasons set forth above and taking into account the
Government of Latvia's significant efforts to reform its AML/CFT
regime, FinCEN is satisfied that ABLV no longer poses a money
laundering threat to the U.S. financial system. Therefore, FinCEN
hereby withdraws its finding that ABLV is of primary money laundering
concern and the related NPRM published on February 16, 2018, seeking to
impose special measure five regarding ABLV.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-22299 Filed 9-26-24; 8:45 am]
BILLING CODE 4810-02-P
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