A unprecedented battle has damaged out between Latvia’s chief monetary regulator and the federal government because the Baltic nation faces worldwide stress to enhance the battle towards cash laundering.
Latvia’s new authorities introduced a complete reform of anti-money laundering measures final week that included a brand new method of choosing the board members of the financial institution regulator, the Monetary and Capital Market Fee.
The plans would pressure Peter Putnins, the pinnacle of the regulator with a contract till 2022, to reapply for his job this autumn as the federal government argues the FCMC is receiving new powers.
In an interview with the Monetary Occasions, Mr Putnins accused the federal government of fixing the regulation purely to do away with him and stated he wouldn’t reapply for his job.
“In a civilised nation this isn’t acceptable . . . You may disguise all the pieces however on the finish, a lot of the ability will likely be concentrated within the authorities’s fingers. This embarrasses us,” he added.
The general public dispute dangers undermining Latvia’s makes an attempt to place a number of high-profile monetary scandals behind it.
The US accused ABLV, Latvia’s then third-largest financial institution, of “institutionalised cash laundering” final yr, successfully resulting in its liquidation. Simply days later, authorities began investigating Latvian central financial institution governor Ilmars Rimsevics for suspected bribery. Mr Rimsevics, who denies the fees, was suspended by the federal government however was reinstated final month after an EU court docket dominated that his dismissal was unfair.
Mr Putnins has led the regulator’s efforts to rein within the non-resident a part of its banking sector, which was on the coronary heart of ABLV’s points and different scandals at Danske Financial institution and Swedbank. Latvia as soon as aimed to be the Switzerland of jap Europe, offering a monetary bridge between Russia and the west, however has since deserted that aim.
Liga Klavina, Latvia’s deputy state secretary for monetary coverage, advised the FT that the change within the nomination course of was not directed at Mr Putnins. “It’s not about Mr Putnins. Mr Putnins . . . has accomplished a great job, particularly with the discount of non-resident prospects within the final years. We are attempting to strengthen our supervisory establishments,” she added.
A lot of the proposed reform offers with suggestions from Moneyval, the Council of Europe’s professional group on anti-money laundering issues. However the change within the choice course of for the regulator was not a part of these suggestions and so is a political choice from the brand new authorities.
Mr Putnins argued that the change within the nomination course of went towards the Basel Committee’s ideas on banking supervision, which specify that there ought to be no authorities interference “that compromises the operational independence of the supervisor”.
“They’re arguing that they need to strengthen the independence. It’s the reverse that’s taking place. Any individual is likely to be very cautious in utilizing such arguments. It’s a bit embarrassing,” he added.
Beneath the present system, the pinnacle and deputy head of the regulator are chosen by the central financial institution governor in session with the finance minister, after which authorised by parliament. The proposal — nonetheless to be voted on by parliament — would see a nomination committee made up of politicians but additionally civil servants and members of different authorities, such because the safety police, choose the 5 members of the regulator, who would then be authorised by lawmakers.
Ms Klavina stated the brand new course of didn’t breach the Basel ideas and could be extra clear than the present one. She additionally denied the federal government was in dispute with Mr Putnins. “I believe we could have a really open and clear dialogue within the parliament,” she added.
Latvia can be coping with the fallout of a money-laundering scandal at Swedbank, the Swedish lender that’s the greatest financial institution within the Baltic nation. Mr Putnins stated that regulators within the area have been on edge over the chance that Swedbank may comply with Danske Financial institution and Nordea in withdrawing from the area. “The entire Baltics are apprehensive about how this can play out.”