Estonia's Financial Watchdog Fines LHV Pank €900,000 for AML/CFT Shortcomings Amid Rapid Growth

Estonia's Financial Supervision Authority (FSA) has imposed a fine of €900,000 on LHV Pank for deficiencies in its anti-money laundering and counter-terrorism financing (AML/CFT) measures, according to an announcement made by the regulatory body today.

The FSA highlighted multiple areas in which LHV Pank fell short, particularly in the establishment and monitoring of business relationships, as well as its obligation to securely store essential data. As part of its response to these shortcomings, the FSA has issued a directive mandating the Estonian bank to enhance its AML/CFT risk control systems.

Kilvar Kessler, the head of the authority, emphasized that LHV's swift expansion within a high-risk environment played a role in the identified deficiencies and violations. Kessler explained, "Rapidly developing payments intermediaries could experience a situation where their risk management side fails to keep up with growth. That is when FSA supervision can remind banks that risk management requires attention and investment."

Kessler also noted that LHV Pank is demonstrating cooperation in addressing the issues: "The bank is being co-operative and is taking measures to rectify the deficiencies. We will be monitoring the process closely."

In an official statement, the FSA elaborated on its actions, stating, "The FSA also analyzed whether the bank’s AML and counter-terrorism funding systems and rules are enough to manage additional risks created in correspondent banking. Shortcomings were found in AS LHV Pank’s AML/CFT controls and business relations monitoring."

The regulatory scrutiny included an on-the-spot inspection at AS LHV Pank to ascertain the alignment of its AML/CFT systems and internal protocols with the legal requirements. The findings of this examination revealed the need for improvements in LHV Pank's AML/CFT controls, particularly in relation to monitoring business relationships and addressing potential risks in correspondent banking.

This incident serves as a reminder of the vigilance required in the financial sector, especially amid the rapid growth of financial institutions. The FSA's intervention underscores the importance of robust risk management and adherence to AML/CFT regulations in maintaining the integrity of the financial system. LHV Pank's willingness to collaborate and undertake corrective actions indicates its commitment to rectifying the identified issues under close regulatory supervision.

By fLEXI tEAM