On Feb. 13, 2018, the U.S. Treasury’s Financial Crimes Enforcement Network accused Latvia’s largest offshore bank, ABLV, of “institutionalized money laundering as a pillar of its business practices.”
Regulators immediately halted ABLV’s authority to conduct U.S. dollar transactions and the European Central Bank froze its payments.
But the crackdown didn’t end business for one slice of the lender’s operation. That’s because Arvis Šteinbergs, who has been identified in the Latvian media as an IOS legal officer, grabbed a piece of ABLV just two months before the U.S. intervention, taking over part of its corporate services. The unit advised clients on setting up offshore companies and optimizing tax obligations.
Šteinbergs’ Anderson Baltic SIA, which shared an address with the IOS office in Riga, Latvia, took a 60 percent stake in ABLV Corporate Services Holding Company SIA on Dec. 4, 2017, less than two months before FinCEN would cut off ABLV’s access to dollar-based correspondent banks.
The bank had owned the holding company outright and retained a 40 percent stake when Anderson Baltic invested, according to ABLV’s 2017 annual report.
Marketing materials touted ABLV Corporate Services for supporting clients across all aspects of the offshore business: consulting on which jurisdictions and corporate vehicles they should use and even how to obtain European Union residency permits. FinCEN alleged the bank also likely helped clients make payments under false pretences by “fraudulent documentation ... of the highest quality.”
OCCRP tried to contact Šteinbergs via Anderson Baltic, through IOS and through another company -- Lexon Incorporations, which was registered using an IOS email address and shared a phone number with Anderson Baltic. Šteinbergs didn’t reply. Queries submitted on Facebook and a message left at a boutique hotel he owns also went unanswered.
The Allegations
According to FinCEN, 90 percent of ABLV clients were shell firms in offshore jurisdictions conducting “tens of billions of dollars” in high-risk transactions from 2012 to 2017.
The deals included:
Moving a “substantial amount of funds from a Russia-based bank in a manner consistent with an illicit transfer of assets.
Funnelling billions of dollars through ABLV shell company accounts on behalf of Ukrainian Serhiy Kurchenko, a billionaire on his country’s most-wanted list for alleged embezzlement and appropriation of property.
Large-scale corruption and money laundering by a politically exposed Azerbaijani using a shell company account at ABLV.
Facilitating transactions for parties connected to North Korea while the rogue nation was under U.S. and United Nations sanctions.
The scale of ABLV’s business was huge, almost as much as Latvia’s Gross Domestic Product in 2016. Almost 13,000 non-resident companies banked at ABLV in September of that year, according to an audit of compliance practices published by the bank in 2017. Over 12 months beginning in December of 2015, those customers received 22.6 billion euros via 593,000 wire transfers and paid 23.5 billion euros to counterparties in 732,000 separate wires. (Latvia’s 2016 GDP was 25 billion euros.)
Last year’s U.S. Treasury allegations were hardly the first money laundering claims raised against ABLV. An OCCRP investigation in 2016 pointed to the bank being used to launder bribes paid to Ukrainian officials.
The bank allegedly processed the bulk of $1 billion in fraudulent loans stolen from a Moldovan state bank in 2014, according to a probe by the U.S.-based financial investigations company Kroll.
And Hermitage Capital Management, the former employer of the late attorney Sergei Magnitsky, has accused ABLV of allegedly handling $102.3 million in stolen money from Russia as part of the tax fraud scheme uncovered by Magnitsky.
FinCEN further accused ABLV of having “used bribery to influence Latvian officials when challenging enforcement actions and perceived threats.” ABLV “proactively pushes money laundering and regulatory circumvention schemes to its client base and ensures that fraudulent documentation produced to support financial schemes, some of which is produced by bank employees themselves, is of the highest quality,” FinCEN said.
In a lawyers’ letter responding to the FinCEN notice, ABLV disputed the allegations.
“ABLV does not dispute that, for much of its history, its business model involved relatively high-risk customers resident in high-risk jurisdictions. But at the time of FinCEN's Notice, [February 2018] ABLV was well on its way with a sustained and well-resourced effort to lower its risk profile,” the bank’s U.S.-based attorneys wrote in April 2018.
Despite the long association with alleged money laundering scandals and the severity of the FinCEN allegations, Latvian regulators allowed the stricken bank to file for voluntary liquidation. This meant its shareholders, who were also its chief officers, could oversee the bank’s wind down.
The anti-corruption advocacy group Transparency International Latvia criticized the decision, citing the risk that it might cover up illicit activity.
In a June 2018 statement, TI called for law enforcement to freeze ABLV’s assets and secure all available evidence. Shareholders and those managing the liquidation “should be notified of their legal obligation to preserve and not conceal evidence, and of their possible criminal liability in acting otherwise,” TI said in the statement.
How the Deal Went Down
On Dec. 19, 2017, Anderson Baltic SIA (Šteinbergs’ business that bought the 60 percent stake in ABLV Corporate Services two weeks earlier), transferred the holding to Arvis Šteinbergs personally. On the same day, Šteinbergs transferred half of his new acquisition to the ABLV Charitable Foundation founded by ABLV shareholders Ernest Bernis and Olegs Fils. Legally, it was independent of the bank.
In other words, ABLV’s corporate services unit moved outside the bank in the runup to the FinCEN decision. But it was still controlled by the same people: bank shareholders continued to hold the 40 percent stake that Šteinbergs’ Anderson Baltic didn’t buy, and the ABLV Charitable Foundation now held a 30 percent stake in the unit. That left Šteinbergs with 30 percent as well.
Arvids Kostomarovs, whose LinkedIn profile lists him as the CEO of ABLV Corporate Services from July 2017 to March 5, 2018, is serving as one of the five liquidators ABLV shareholders appointed to wind the bank down. ABLV spokesman Arturs Eglitis, speaking on Kostomarovs’ behalf, said selling off the corporate services business was a simple matter of cutting the bank’s exposure to the advisory sector.
Eglitis said the liquidators “would not be in a position” to comment further on business decisions ABLV made before the bank started to close.
Bernis and Fils didn’t respond to requests for comment.
