Headline: Estonian LHV Pank Faces €900,000 Fine for Money Laundering and Counter-Terrorism Funding Shortcomings

Overview

• The Financial Supervision Authority (FSA) has imposed a €900,000 fine on Estonian bank LHV Pank for inadequate anti-money laundering (AML) and counter-terrorism funding (CTF) systems and internal rules.
• LHV Pank must rectify the identified deficiencies.

FSA Inspection Findings

1. Non-compliant AML/CFT controls and monitoring of business relations:

   • LHV Pank’s AML/CFT systems and internal rules were not adhering to the law.
   • The bank’s obligation to store data was not properly addressed.

2. Examination of risk management in providing services to other financial institutions and correspondent banking:

   • The FSA inspected whether LHV Pank’s AML/CFT systems and rules complied with the law when offering services to other financial institutions.
   • The authority also examined LHV’s AML/CFT systems and rules to manage additional risks created in correspondent banking.
   • The inspection uncovered shortcomings in LHV Pank’s AML/CFT controls and monitoring.

Rapid Growth as a Potential Cause

• FSA Head Kilvar Kessler suggested that LHV Pank’s rapid growth in a high-risk environment led to the deficiencies and violations.
• He noted that fast-growing payments intermediaries could experience a situation where their risk management fails to keep up with growth, leading to the need for closer FSA supervision.

Cooperation and Future Monitoring

• Despite the fine, LHV Pank has cooperated constructively with the FSA and is taking steps to address the deficiencies.
• The FSA will closely monitor the rectification process.

Other Estonian Banks Faced Fines as Well

• In earlier this year, the FSA fined another Estonian bank, Coop Pank, €1.2 million for insufficient AML/CFT measures.
• The FSA has intensified its efforts to enforce stricter AML/CFT measures in response to growing concerns about money laundering in the Baltic region.