Baltic International Bank (BIB), which was shut down by the banking regulator this week and raided by police, and its shareholders have failed to submit documents proving the origin of the bank’s new investors’ money. This was one of the reasons why the Financial and Capital Market Commission (FCMC) and the European Central Bank had not approved the change of ownership of the bank, discovered “de facto” the LTV program.
However, the origin of the money wasn’t the only factor in the FCMC deciding to close the bank on Monday in an emergency session. The bank has not been profitable for a long time and its transaction control system was not compliant with the law, explained Santa Purgaile, president of FCTK.
The search of the bank by the State Police, breaking down the entrance door, and of the homes of the employees immediately after the decision of the supervisory authority was instead related to the investigation for possible money laundering in the amount of the file.
Neither Purgaile nor the police explain what exactly the investigation is about. The police only say that there are no detainees. However, two “de facto” sources cited as a reliable version that the criminal case is related to the origin of the money of the bank’s new shareholders.
Earlier this year, BIB presented to the media three new investors from Switzerland and the United Arab Emirates, who are said to have injected 12 million euros into the bank. Among other things, the new shareholders are engaged in gold and cryptocurrency trading business.
“Honestly it was a coincidence. I’m looking for a bank in Europe. This opportunity presented itself. But for the first two weeks I hadn’t thought much about it, I hadn’t even read the offer. But after two weeks, I had the feeling of I decided to read the offer. After a few days, I already thought it was interesting to invest here,” Swiss Tomas Šaeti, owner of BIB’s new shareholder Migom Investments, told Latvian television in early January.
In March, the bank announced that Sheikh Hamad bin Khalif bin Mohammed al-Nahyan would become its largest shareholder in place of the Belokoni brothers, but the transaction was not approved by the European Central Bank and the FCTK.
When asked if it was unclear what money the new shareholders invested in BIB, the head of FCTK, Purgaile, replied the following: “Yes, the bank hadn’t done their homework, including the shareholders. The shareholders and the bank have had to present a series of documents proving both the origin of the funds and a viable future strategy, as well as how the bank’s internal management and control systems will be improved. We have not received these documents”.
As for Hamad bin Khalifa bin Mohammed al-Nahyan, who wanted to be presented as the bank’s largest shareholder, publicly available information shows that doubts about his wealth arose early last year in Israel, when he considered the buying a football club there. As reported by the business newspaper “Marker”, the Israel Football Federation investigated that the sheikh’s wealth consists mainly of unrealizable Venezuelan government bonds. Sheikh has connections with people involved in fraud and money laundering. He owns dozens of dormant companies.
We were unable to get the bank’s comment on new investors and the FCMC’s decision. Neither the closed bank nor its largest owner Valerys Belokons could be reached this week.
BIB also had financial problems. At the beginning of this year BIB estimated that it had closed last year with a profit of 870 thousand euros, but after recalculating the accounts it emerged that the bank had a loss of five million euros.
The auditors, who viewed the bank’s last year’s report, noted positions of millions of euros, the assessment of which was too rosy. In the opinion of the independent auditors BDO, part of the loan granted by the bank to the lender in Spain cannot be recovered; a client from Cyprus who owns agricultural land and a warehouse in Russia defaults on his obligations; non-recoverable collateral money given to an individual to purchase stock in a US technology services company. And these aren’t the only examples cited by reviewers.
Usually, in the process of liquidating banks, it turns out that the property is not as careful as it is indicated on the card, and it is not possible to return the money to all creditors. Will this time be different? FKTK head Purgaile believes that BIB’s assets are currently valued appropriately.
After the decision of the European Central Bank to cancel the license, the FCMC will decide how to continue the process of closing down BIB, but it will most likely be liquidation of the bank, not insolvency.
