Latvia Signals Russia May Be Interfering in Banking Crisis
Latvia Signals Russia May Be Interfering in Banking Crisis
(Bloomberg) -- The banking crisis engulfing the tiny nation of Latvia has turned into a potential diplomatic incident, as Riga points the finger at Moscow.
“There is a high probability that an externally organized widespread information operation is being carried out that, by its structure and execution, is identical to those observed in pre-election periods in the U.S., France and Germany,” Latvia’s Defense Ministry said in an emailed statement on Tuesday.
The Latvian accusation is the latest twist in a scandal that’s transfixed the European Union and NATO member nation of 2 million inhabitants that abuts Russia. A regional banking hub, Latvia has long faced questions over its enforcement of money-laundering rules, concerns that escalated when central bank Governor Ilmars Rimsevics was detained over the weekend by the country’s anti-corruption agency on suspicion of securing bribes.
While it didn’t explicitly name Russia, the ministry cited recent events, including the publication of a photograph that allegedly shows Rimsevics in Russia, as evidence of an attempt to damage the country’s image and erode public trust in the state before elections this October. The warning comes four days after U.S. Special Counsel Robert Mueller accused 13 Russians of a sophisticated disinformation campaign that targeted the 2016 election and sought to sow discord in the U.S.
Adding Fuel
“They see the situation is hot and add more fuel to the fire,” said Ainars Latkovskis, a member of Latvia’s parliament, according to the LETA newswire. Russia is attempting to create chaos in Latvia by portraying it as a failed state in the eyes of the international community, he said.
The 52-year-old Rimsevics has led the central bank since 2001, making him the longest-serving head of a national bank on the European Central Bank’s Governing Council, which he joined in 2014 when Latvia adopted the euro.
Rimsevics, who was released on bail late Monday and hasn’t been formally charged, denied seeking bribes and accused lenders of conspiring against him. He resisted pressure from Latvian officials to resign from his post and told reporters in Riga that he’s “not guilty.”
Kaspars Galkins, a spokesman for the Latvian Defense Ministry, declined to comment. Russian Foreign Ministry spokeswoman Maria Zakharova didn’t respond to a request for comment.
The probe coincides with separate bribery allegations against the central banker from Norvik Banka JSC, a Riga-based lender controlled by Grigory Guselnikov, a Russian-born U.K. citizen. Norvik detailed accusations in a 39-page complaint to a World Bank arbitration body. The document, obtained by Bloomberg News, referred to a “very high-level, senior Latvian public official” that Norvik Chief Executive Officer Oliver Bramwell said was Rimsevics.
The complaint, filed in December, also alleged that the Latvian banking regulator had retaliated against Norvik for the refusal to pay the bribes over a two-year period to late 2017. The regulator denied those allegations.
The country’s Corruption Prevention and Combating Bureau, which detained Rimsevics, said its inquiry doesn’t relate to Norvik or any bank currently operating in the country.
The probe into the central bank chief is just one piece of the financial scandal in the former Soviet republic, which regained independence in 1991. Just last week, the U.S. Treasury Department proposed to ban ABLV Bank SA, the third-largest lender, from the U.S. financial system, saying it helped entities allegedly linked to North Korea’s missile program and institutionalized money-laundering as a “pillar” of its business.
The U.S. has “full confidence” that Latvia will take the necessary steps to uphold the integrity of its banking and financial sector, State Department spokeswoman Heather Nauert said Tuesday.
Undermining Integrity
The latest allegations have put the government in a tight spot. While Prime Minister Maris Kucinskis has called for Rimsevics to step down, he also accused Norvik on Tuesday of seeking to undermine the integrity of the country’s financial system. Norvik hasn’t presented evidence of its allegations, Kucinskis told reporters on Tuesday.
Rimsevics, speaking at a press conference, accused a group of banks of working against him. Just hours after he declined to provide a loan from the central bank to ABLV on Feb. 16, his office and house were searched by Latvian authorities, he said. The central banker also said he received a text message at the end of last month threatening that he would be shot, and informed law enforcement officials.
Guselnikov has demanded 200 million euros ($247 million) to leave Latvia and give up his bank, Rimsevics claimed. “I have no doubt that these banks are coordinating among themselves against me and the state of Latvia,” he said.
The Russian-born banker hit back at Rimsevics, who was deputy governor of the central bank from 1992 before taking the helm nine years later.
“Now the regulator is trying to pretend there was no corruption. It’s clear he was at the top of it, without him nothing would have happened,” Guselnikov said by phone from London. “For 25 years Rimsevics has been directing things.”
To shake off accusations that its lenders hold wealth with questionable origins, Latvia’s financial regulator has fined three banks for handling accounts that were involved in a $1 billion Moldovan fraud in 2014. Five Latvian banks agreed last year to fines for failing to perform adequate due diligence and gather sufficient information on transactions and beneficiaries of deals linked to North Korea.
--With assistance from Michael Winfrey Milda Seputyte and Aaron Eglitis
To contact the reporters on this story: Ott Ummelas in Riga at oummelas@bloomberg.net, Henry Meyer in Moscow at hmeyer4@bloomberg.net.
To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net, Frank Connelly
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