Work visits to the U.S. described as “fuckery”, promises to “fix things” in the banking sector, disclosure of confidential information in a sauna and false testimony: a dropped case lifts the veil on how the former governor of the Bank of Latvia operated.
As the summer of 2014 drew to a close, Ernests Bernis, one of the owners of ABLV Bank which regularly featured in international money laundering scandals, received a call from Ilmārs Rimšēvičs, the Governor of the Bank of Latvia (BoL).
Although both men were on vacation, Rimšēvičs wanted to meet, preferably somewhere informal.
Given Rimšēvičs’ status, Bernis agreed, and they met at a central hotel in Riga. Rimšēvičs talked a lot about how important it was to “make friends with the USA” and that only his active role as conciliator could save Latvia’s large non-residential banking sector.
Then came the ask: to protect ABLV’s operations, the bank needed to pay 80,000 euros to lobbyists of Rimšēvič’s choice.
Bernis refused. The amount seemed “small and not serious” compared to the millions the bank was investing to improve its anti-money laundering systems. He also doubted the lobbyists could do what Rimšēvič’s was promising. “That’s not our way,” Bernis told him. Visibly upset, Rimšēvičs advised him to think it over.
After this conversation, the relationship between the two deteriorated. The bank, whose activities had been essentially ignored by the local banking regulator up to this point, now faced four checks in a row. The last inspection turned out to be fatal for ABLV.
In 2017, five Latvian non-resident banks were fined by the regulator, FCMC, for not having adequate controls which led to circumvention of international sanctions against North Korea. ABLV was the sixth, but fiercely protested the findings and escaped the looming fine. As 2017 drew to a close, the case was closed as FCMC and the bank concluded a non-disclosure agreement which protected the details of the case from leaking.
The FCMC decision was a straw that apparently broke the camel’s back. Shortly afterwards the U.S. financial investigators, FINCEN, published its own report that portrayed the bank as an organized crime group rather than a reputable financial institution. The U.S. essentially banned its banks from working with ABLV.
The bank’s clients panicked and began to massively withdraw money, a run on the bank that finally killed it.
Arrest that shocked the banking world
But the biggest shock was yet to come. In Feb, 2018, Rimšēvičs, who was long-term top banking official and key member of the European Central Bank, was detained on suspicion of corruption related to another well-known international laundromat, Trasta Komercbanka. Afterwards, the banker Grigory Gusselnikov of Norvik Bank also announced that Rimšēvičs had extorted bribes from him for years.
After Rimšēvičs arrest in 2018, the owner of ABLV felt it was time to tell his story.
Bernis went to Latvia’s anti-corruption office (KNAB), claiming that ABLV had fallen victim to dishonest behavior and targeted sabotage by the Rimšēvičs or people in his circle who, among other things, might have misled the U.S. authorities.
Criminal investigation was launched and Rimšēvičs named a suspect for soliciting a large-scale bribe and abusing his official position.
At the end of March 2021, this investigation was terminated due to lack of evidence.
Re:Baltica managed to obtain this decision which saved Rimšēvičs from another court case, but lifts the curtain on the methods by which the former governor of the BoL has operated.
Discredited testimonies
The U.S. has been dissatisfied with the role of Latvia’s non-residential banks in money laundering almost from the very beginning. The banks’ self-described role as the “bridge between East and West” in reality amounted to serving various dubious customers from the former USSR republics. For many years, the FCMC turned a blind eye and did not punish the banks. All this time, Rimšēvičs was in senior positions at the BoL.
When Latvia wanted to join the OECD, however, its history of shady banking practices created problems. The former head of the FCMC came under criticism for failing to clean up the money laundering and resigned in February, 2016. Parliament confirmed his deputy Pēters Putniņš, who had previously worked for the BoL, as the new chief. To save Latvia’s banking reputation, FCMC also appointed a representative in the U.S. who was supposed to smooth the relationship and ensure effective information flow between the both countries.
Must go to the U.S. “on a mission to be fucked”
They all ended up as witnesses in the ABLV case against Rimšēvičs, and, according to the KNAB decision, gave false testimonies.
But the most unbuttoned discussions took place between two men who played no formal role in bank supervision – Rimšēvičs and his alleged intermediary, businessman Māris Martinsons – while they were sweating in the sauna. Their freewheeling remarks were surreptitiously recorded by law enforcement officers in the framework of other criminal investigations.
On April 8, 2013, Rimšēvičs told Martinsons in the sauna that U.S. authorities were moving against four suspect Latvian banks and the following week “the Americans” will arrive with “papers”, which he promises to show Martinsons (this conversation is difficult to completely recreate, because the KNAB has deleted the names of the banks in the report).
“So, they are fucked?” Martinsons asks, using some choice Russian swearwords.
“No, not fucked yet,” Rimšēvičs replied in the same manner. “But we will give you six months. And if there isn’t, well, you don’t understand and we will go against, have a look, and then you will be…”
The two then discuss the situations of specific banks and Rimšēvičs proposes to set the next date of the meeting, as he must go on a work trip to the U.S.
“I’m in America for, for everything. To get fucked, to get information and so on. Yes? Yes. Well, this here, about those Americans, what I told you, well, that is, it’s so serious,” Rimšēvičs says.
The former head of the central bank boasts that he had managed to “clean up” the situation before, but “these have nothing to clean up. If these guys say that it’s over, then everything ends for you. You can’t do payments anymore. You understand?”
Martinsons wants to know what’s next, to which Rimšēvičs replies that then the suspected banks will be closed down by U.S., which he is trying to explain to them.
“Bernis, the twat, goes the fuck around with, with presentations – the Cabinet, the Prime Minister, the Budget Committee of Parliament. He just says, “Yo! We’re tightening up here, so to speak, with the money, we’re creating jobs here. Look at how much we pay in taxes! Fuck yeah, what kind of stories are those, man! Come on! Well, they are childish somehow!” the central bank’s governor at the time complains.
During interrogation in March 2021, Martinsons claimed that he could not remember anything about the conversation. The same amnesia plagued Rimšēvičs, who, after the transcripts were shown to him, refused to testify.
Before that, he had filed a written affidavit stating he had not met Bernis at the time and had not asked for money. In his words, it is absolutely inconceivable that as governor of the BoL, he could engage in a cover-up of money laundering and offer someone a way to evade U.S. sanctions.
He later added that he was not aware of FINCEN‘s upcoming report and that there was no possibility at all for a foreigner to influence the independent American institution.
On a third occasion, exercising his right not to testify, he refused to explain his relationship with Bernis or why the banker would accuse him in this manner. Bernis allegedly did so after FINCEN‘s announcement, because “someone” asked him to, Rimšēvičs said. He refused to speculate on who that someone might be, or to confront Bernis further.
Not buying, but not persecuting either
In the decision, KNAB essentially admits to believing Bernis’ story, while finding the former BoL Governor’s denials and claims of defamation not credible.
“There is no reason to believe in Rimšēvič’s testimony that no such meeting took place between him and Bernis because (..) he gave false evidence before. He claimed he did not know that FINCEN was drawing up proposals for the closure of ABLV bank’s U.S. correspondent accounts. The content (of the testimonies of the other FCMC officials – ed.) proves that Rimšēvičs is lying in this matter. His testimonies must therefore be viewed critically in general, as they contain a false account of events,” the decision states.
Investigators also does not believe the testimony of the then-head of the banking regulator Putniņš that Rimšēvičs could not influence the decisions of the FCMC. In some cases he tried to, and all documents of the FCMC on the investigation of ABLV‘s work were sent to him as head of the BOL.
Putniņš, who had since left the regulator, refused to comment because of the non-disclosure agreements he had signed, but insisted he did not lie in the testimony. In his words, the very fact that the state forces a person to sign a non-disclosure agreement, but then makes the testimonies in case public, should be considered scandalous.
KNAB also rejected the testimony of Arnis Lagzdiņš, a former FCMC representative to the U.S. He was a person whom Rimšēvičs had named to Bernis as related to the lobbyists, GK Banking Partnership, to whom ABLV shall pay the money.
Lagzdiņš claimed he did not participate in any meetings with the US institutions prior to the FINCEN report. Because other witnesses proved that he had been present in a few, KNAB considered his testimony to be a lie, but could not figure out what exactly he was doing in the US and what he had talked about with Rimšēvičs. “The investigators could not find evidence of what specific work Lagzdiņš did in the field entrusted to him in the U.S., including whether he fulfilled his duties at all,” decision states.
The other two lobbyists from GK Banking Partnership testified like a Siamese twins: they met with Rimšēvičs many times, but all the meetings were related to their work on behalf of the Latvian banking umbrella organisation and the preparation of a conference in the U.S. on the progress made by Latvian banks in preventing money laundering.
Consequently, the KNAB was not able to prove that the lobbyists or Rimšēvičs himself could have influenced the U.S. authorities in the way Rimšēvičs promised Bernis.
As the U.S. had turned down two requests from Latvia for legal assistance in this case, KNAB felt it could do nothing more but to close the case.
Rimšēvičs in a brief conversation with Re:Baltica declined to comment until “all these things are unraveled and over.”
ABLV money laundering investigation still pending
The Bernis case was one of several criminal proceedings brought against Rimšēvičs for alleged corruption. Re:Baltica found out that the case which was opened after the complaint by the banker Gusselnikov, a former shareholder of Norvik Bank, that Rimšēvičs and associates were extorting bribes from him has also been closed as lacking evidence.
Currently Rimšēvičs is on trial in a third case in which he is accused of accepting a bribe – an expense-paid trip and cash – and laundering EUR 250,000, from former shareholders of Trasta Komercbanka for assistance in settling cases with the FCMC. The intermediary was Martinsons. Both defendants deny the charges.
The police are still investigating about 50 criminal cases for alleged money laundering via ABLV Bank. In addition, in about 10 cases bank employees may have helped launder funds, the archive of the news agency LETA shows. In February this year, the police froze Bernis’ assets to ensure possible confiscation of assets as an additional punishment.
After KNAB’s decision Bernis spoke to Latvian TV with some bitterness. “It was hard for me to read this. On the one hand, everything I have been looking for the truth about for the last three years has been written here. It is all there. On the other hand, it is very difficult to read because it can be seen – for many years the former governor of the Bank of Latvia did everything to sink us.”
Bernis has emerged from this situation with some satisfaction. Since the U.S. has twice denied the KNAB’s requests for legal assistance, but the Latvian authorities have claimed they do not have information about the alleged bribery of officials by the bank’s management described in FINCEN‘s report of 2018, KNAB has closed this part of investigation as well.
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Translated into English by Juris Kaža
Edited by Sanita Jemberga and Jody McPhillips
