RIGA (Reuters) – The International Monetary Fund (IMF) on Friday urged Latvia to maintain momentum in its fight against money-laundering as the Baltic nation tries to restore its reputation after recent scandals involving the financial sector.
The country’s third largest bank ABLV was shut down last year after the U.S. authorities accused it of institutionalized money laundering and U.S. sanctions breaches, triggering Latvia’s worst financial crisis in a decade.
“Failure to strengthen the effectiveness of the AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) regime and refocus banks servicing foreign clients towards a viable business model could significantly undermine the stability of the financial system and its capacity to support investment and GDP growth,” the IMF said in a statement following a regular economic review.
Stung by international criticism, the government has launched an effort to clean up the financial sector ahead of an upcoming review by Moneyval, an international money-laundering standards watchdog, which could label Latvia as risky.
Earlier this month, the Latvian parliament boosted powers of its banking regulator in combating money-laundering and terrorism financing.
“The effort going forward needs to continue and […] the challenge ahead is very significant,” said IMF mission chief Iva Petrova to journalists in Riga.
The IMF wants to see better use of intelligence and more cooperation among responsible authorities both at local and at international level.
“We have actually been in support of European institution in charge of AML/CFT supervision,” Petrova said. “We consider that such an institution would strengthen capacity and help harmonize supervisory practices across countries.”
Latvia’s central bank Governor Ilmars Rimsevics, a top policymaker at the European Central Bank, is awaiting trial after being charged with taking a bribe and money laundering.
He is also being investigated for bribery linked to ABLV. Rimsevics denies any wrongdoing.
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