Question: What you think - at the end will Regulator to contain all this laundering schemes or too much influence/lobby from banking groups? And if contain main scenario will be: 1.) Banks quietly will shut down such operations or 2.) There will be big scandals ahead ?
Answers: Thank you for your question. One issue offering hope is that there is now reported to be mounting pressure coming from US. Washington officials have apparently told Riga in no vague terms the Latvian banks must clean up their act or be forced to do so.
The current political situation in Latvia could be favourable as well to push the regulator FKTK into becoming more effective in tackling money laundering and corruption. There is going to be a new government within days and 2016 is the year in which Latvia is hoping to join the OECD. It could be a feasible political goal for the new government to make FKTK finally tackle the dubious schemes in Latvian banks to make the OECD membership reality.
The question is, however, who at FKTK will do it? The current deputy head of the regulator Peter Putnins, who also is the candidate to become the new head, has been described by the likely Finance Minister Dana Reizniece-Ozola, as unable to make the necessary changes at the watchdog. As deputy, Putnins determination to push past the powerful business lobbies that appear to have successfully leashed the regulator over recent years is presumably a question.
That could yet convince the new government to replace entire FKTK management with new people, more determined to carry out changes and consequently contain the laundering schemes. These have thrown up numerous international and domestic scandals in recent years, and unless the regulators clamp down there seems little reason to believe that will stop going forwards.
On the negative side, however, Latvia has a history of not bothering with international criticism of what's going on with its banking system. It may have to do with the links its political elites have had with the banks over the years. Most recent example is the establishment of Certus, a think tank, which is trying to lobby for changes in the banking regulatory framework that, according to critics, will lead to "off-shorization" of the Latvian banks.
Certus' board includes the former ambassador and Minister of Foreign Affairs Aivis Ronis, who has worked as a non-resident bank representative, Deputy Chairman of the Board at ABLV Vadims Reinfelds, as well as the head of the Association of Latvian Commercial Banks Mārtiņš Bičevskis, according to RE:Baltica. The Stockholm School of Economics in Riga terminated cooperation with people linked to Certus saying it would not like to work with "organisations nor with people who are financed and are representing the interests of non-resident banks, since there is a high risk that we might be associated with money laundering – an activity that we do not consider commendable."