Posts Tagged ‘latvia’

03
January 2014

Latvia Adopts Euro, Dirty Money an Issue

Epoch Times

When Latvia adopts the euro on Jan. 1, it will bring with it a banking sector that is swelling with suspicious money from Russia and the East—just as the currency bloc is clamping down on money laundering and other illicit banking activities.

It was just nine months ago that the eurozone had to rescue Cyprus, a similarly tiny member state that also specialized in attracting huge deposits from Russia and former Soviet states. Since then, eurozone leaders have vowed to crack down on financial sanctuaries and improve transparency.

But as the 18th member of the eurozone, Latvia is likely to see a greater—not smaller—influx of dirty money as the country will be viewed as safer than its eastern neighbors while financial oversight remains loose.

“Immediately after Latvia joins the eurozone, I imagine we’re going to see an actual spike in dubious money flowing in,” said Mark Galeotti, a professor at New York University who researches organized crime in the former Soviet Union.

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29
July 2013

Latvia: the Next Cyprus?

The National Interest

Earlier this month, EU finance ministers gave their approval for Latvia to become the eighteenth member of the Euro in January 2014. It seems counterintuitive that the country of two million people would want to enter the perpetually distressed and recession-stricken economic zone. But for Latvia it has a variety of benefits, not the least of which would be to allow its impressive financial sector easy and unfiltered access to the rest of the continent. The hope is that by embracing the euro and committing itself to the necessary structural preconditions for acceptance, that Latvia will see economic growth and avoid events like the massive drop in GDP it experienced after the 2008 global economic crisis.

Latvia joining the euro, taken by itself, would seem at the very least uninteresting to most observers and politicians sitting in Brussels and Washington D.C. But there is a more worrisome aspect that troubles those very same politicians and portends an economic crisis on the scale of Cyprus if it is not carefully addressed. That nefarious aspect is the country being used as an entry point for illicit Russian money seeking to enter the EU.

The concern over Latvia entering the EU is in part due to the striking similarities between the Cyprus and Latvia. Like Cyprus, Latvia has an oversized financial sector compared to its population, which it has made the centerpiece of its economy. Both countries have strikingly low corporate tax rates, with Latvia at 15 percent and Cyprus at 12.5 percent (the Euro average is 23.5 percent). Additionally, a majority of the services in these nations cater to foreign clients, particularly Russian clients—or from former Soviet states in Central Asia—hoping to escape the capricious and unstable legal and economic situations inside of their country. (More often they are simply hoping to move their money from the watchful eye of Rosfinmonitoring—Putin’s personal financial-intelligence-collection unit). But making Latvia even more dependent on Russian money is the fact that nonresidents account for 48.9 percent of deposits, compared to 43 percent in Switzerland (the perennial tax-cheat haven) and 37 percent in Cyprus. Since 2010 nonresident deposits have increased 32 percent (According to the Latvian central bank, foreign direct investment from Russia has increased from 268.6 million euros in 2010 to 356 million euros today). These statistics are especially troubling considering that in 2008 one of Latvia’s largest banks, Parex, was forced to seek a government bailout due to worried investors withdrawing over $120 million in November alone. Situations like Parex forced Latvia to seek a bailout.

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24
July 2013

Latvia – like a Virgin island

Business News Europe

If you’ve ever wondered what sort of tax dodges they get up to in the British Virgin Islands, take a trip to Latvia and speak with Kristaps Zakulis, chairman of the country’s financial regulator, the Financial and Capital Markets Commission (FKTK). Zakulis displays impressive knowledge of and enthusiasm for talking about the Caribbean archipelago whenever Latvia’s own offshoring industry is mentioned.

During the course of an interview lasting less than an hour, he racks up a couple of dozen uses of the words “British Virgin Islands”, “former British colony” and “John Smith” – all the more impressive when the conversation was supposed to be about his agency’s investigation into the links between Latvian banks and the notorious Magnitsky affair in Russia.

The annoyance Zakulis expresses over anything bearing a Union Flag was clearly supposed to provoke your correspondent into a fit of patriotic indignation, yet never having been to the Caribbean archipelago or of a high enough net worth to open any tax-efficient account more impressive than a Post Office savings book, it was a wasted expenditure of energy.

But Zakulis’ probable point is that whatever is happening in Latvia is happening elsewhere too – which is certainly true as far as offshoring goes. To an extent the point could also be applied to the Magnitsky case, as banks in Moldova, Lithuania, Estonia and Cyprus holding accounts from the UK, Belize and – you guessed it, the British Virgin Islands – have been named by lawyers representing Hermitage Capital Management of laundering $230m in the case that led to the death in detention of their lawyer Sergei Magnitsky. According to the lawyers, around $63m of that total was laundered via six Latvian banks in 2007 and last year, Hermitage filed a complaint in Riga demanding the authorities look into its allegations.

Latvia’s Economic Police initially seemed disinterested, but did eventually open an investigation that is ongoing though yet to bring any criminal charges.

To its credit, FKTK was much more active in conducting an investigation and even found one bank culpable enough to impose the maximum fine it is allowed by law, LVL100,000 (€142,000). But the Magnitsky case has a way of making everyone it touches look absurd, from the ridiculous contradictory accounts of how the lawyer met his death in the first place to his ludicrous posthumous conviction pushed by the Kremlin. The Latvian connection does not disappoint in this regard either, for FKTK refuses to say not only when the fine was imposed, but even the name of the bank that is supposed to pay it.

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20
June 2013

Latvia fines bank over Magnitsky money laundering

EU Observer

Latvia’s Financial and Capital Market Commission on Tuesday (18 June) said it has imposed a fine of 100,000 lats (€142,543) – the maximum fine under Latvian law – on a bank involved in laundering over €170 million stolen from the Russian government.

The name of the bank was not made public.

The money laundering scheme was revealed by Sergei Magnitsky, a lawyer who worked for Hermitage Capital Management, an investment fund specialising in Russian assets.

He died in a Russian jail in 2009 after being beaten and denied medical care.

Hermitage filed a complaint in July 2012 to Latvian authorities naming six Latvian banks that allegedly laundered funds from the illegal tax refund exposed by Magnitsky.

The Magnitsky case has caused international uproar, with the US in April imposing a travel ban on 18 Russian officials linked to the affair.

Latvia is due to adopt the euro in January 2014 and is under increased pressure from the EU to clean up its act on money laundering, especially as Russian capital may have moved from bailed-out Cyprus to the former Soviet republic.

Around half of the €17 billion deposited in Latvian banks is owned by foreigners.

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19
June 2013

Latvian Bank Fined For Magnitsky-Related Money Laundering

Radio Free Europe

A Latvian bank has been hit with the stiffest fine possible for involvement in money laundering connected to the case of the whistle-blowing Russian lawyer Sergei Magnitsky.

Latvia’s Financial and Capital Market Commission announced that it has levied a $191,000 fine on the bank for its role in laundering $230 million stolen from the Russian government.

The regulator did not name the Latvian bank.

The investigation started after Heritage Capital Management, where Magnitsky worked, filed a complaint in July 2012 naming six Latvian banks that allegedly received funds from the huge illegal tax refund Magnitsky exposed.

A police official accused by Magnitsky began an investigation against him for tax fraud.

Magnitsky was detained in 2008 and died in pretrial detention in 2009 after being beaten and denied medical care.

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17
June 2013

Boozy Latvian ‘billionaire’ is smokescreen for fraud

Sunday Times

An itinerant, hard-drinking Latvian pensioner has emerged as one of the world’s richest men — on paper.

Erik Vanagels, 73, appears to be a billionaire with an empire that has interests in hundreds of businesses including banks, investments funds, pharmaceuticals and shipping. But it is not his. Vanagels is revealed today as the stooge director of “brass-plate” companies that stretch from London to the Caribbean.

Leaked offshore documents show that he is one of the most widely used corporate ciphers in the world. His name has been used to conceal the true beneficiaries of thousands of firms, some scandal-ridden.

Vanagels’s 13-year business career has been made possible by corporate secrecy in Britain, its overseas territories and leading world economies.

The case underlines David Cameron’s call for greater corporate transparency.

The Sunday Times and the International Consortium of Investigative Journalists have established that Vanagels and Stan Gorin, a fellow nominee director, have served on firms linked to a series of financial scandals. The stooge directors would have signed away their rights to any powers and been unaware of any alleged fraud.

The scandals include the theft of $230m (£146m) from the Hermitage Capital fund in Russia; the alleged defrauding of the Kazakh BTA Bank of £3bn, and an American Ponzi scheme.

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17
June 2013

Fraud trail leads to OAP’s tiny flat

Sunday Times

A hard-drinking pensioner in Latvia has been revealed as the frontman for a network of scandal-hit companies.

In a bustling cobbled street in central Riga, an alleyway leads to a modest red-brick and wooden apartment block. It is the last known address of an apparent business colossus — Erik Vanagels.

Friends and relatives of the former factory worker claim he has poor sight, is a capacious drinker and disappears for weeks on end.

A leak of offshore documents to the International Consortium of Investigative Journalists (ICIJ) reveals a rather different figure: an apparent tycoon with interests in banking, investment funds, pharmaceuticals and shipping. He is a director or an owner of several hundred companies around the world.

On paper Vanagels is probably a billionaire. In reality the 73-year-old is a corporate cipher used as a veil to conceal the real beneficiaries of companies.

Among the world of investigators and lawyers who unravel complex frauds, Vanagels is an almost mythical figure. His companies have been involved in a series of financial scandals and alleged frauds. These include:

■ The Hermitage Capital fund money laundering scandal in which $230m (£146m) was allegedly looted between December 2007 and February 2008 in a fraud involving the fund’s Russian operations.

■ Technomark Business, a London company, is alleged to have received $43m of stolen Hermitage funds that were wired to a Latvian bank account. Vanagels was a director of Technomark’s parent company.

■ Mukhtar Ablyazov, who has been sued by BTA Bank, for which he worked, for misappropriating billions of dollars using various companies including British-based Loginex Projects. Vanagels was a shareholder and director of the companies that controlled Loginex.

■ A Ponzi scheme that operated in America in 2009 — the Rockford Group — routed more than $500,000 illicit funds to a British company, Intercity Transit, according to court filings by the US Securities and Exchange Commission.

A Cypriot company in which Vanagels was a director was used as a UK corporate director of Intercity Transit.

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05
October 2012

Latvian prosecutors open probe into bank links to Magnitsky case

Business News Europe

Latvian prosecutors are set to investigate claims implicating several of the country’s banks in the alleged Russian tax fraud scheme that blew up into an international incident when it led to the 2009 death of lawyer Sergei Magnitsky in detention in Moscow, according to investigative journalism NGO Re:Baltica. The cast of characters implicated represents a roll call of Latvians that have regularly cropped up in relation to questionable Russian and Ukrainian state deals.

The Latvian prosecutor’s office announced late on October 2 that it has reversed an earlier decision by the state police not to investigate whether Latvian banks helped to launder at least $63m out of Russia in 2007. The funds are claimed to stem from a huge tax fraud operation alleged by Hermitage Capital against members of Russia’s tax police.

Alexander Cernisovs, chief prosecutor responsible for organized crime, told journalists that having studied the evidence from Latvian banks, he has determined that the state police’s decision not to start a criminal investigation was contrary to law and unjustified, reports Re:Baltica. He said he has sent the evidence of Latvian banks’ involvement back to the police for re-investigation.

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03
October 2012

Latvia to check for bank links with Magnitsky case

Reuters

Latvia is to investigate whether the country’s banks played any part in an alleged multi-million dollar Russian tax fraud made public by Sergei Magnitsky, a lawyer who died in detention in Russia in 2009.

The state prosecutor’s office said on Wednesday it had reversed a decision by police to reject a complaint from British law firm Brown Rudnick alleging Latvian banks were used to launder $19 million.

Prosecutors have checked material linked to the case and sent the complaint back to the police for further investigation as it was rejected without considering the facts presented.

In July, Latvian authorities received a letter from Brown Rudnick, acting on behalf of London-based Hermitage, once the largest foreign investor in Russia and for whom Magnitsky worked, alleging six Latvian banks had been involved in laundering $19 million.

The case stems from whistleblowing by Magnitsky, who died just under a year after being held on tax evasion and fraud charges which, former colleagues said, were fabricated by police investigators he had accused of stealing $230 million from the Russian state through fraudulent tax refunds.

While Magnitsky’s death was officially attributed to an undetected illness, the Kremlin’s own human rights council has said he was probably beaten to death.

U.S. lawmakers have drafted legislation named after Magnitsky that would impose sanctions on Russian officials involved in human rights violations.

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