The decision by Latvia’s ABLV bank to enter voluntary liquidation in March 2018 signals the failure of Latvia’s attempt to restore American trust in its banking sector. The bank had been sanctioned by the US for money laundering. The failure by the FCMC, the Latvian financial regulator, to address the rampant criminality of one of its financial institutions, is not surprising given their track record. In 2015 they hired Arnis Lagzdins as the front man for restoring the US’s trust in Latvian banks. This appointment was curious, given that Arnis’s career is littered with the corpses of corrupt Latvian and Lithuanian institutions. However, he has nevertheless enjoyed a charmed career, unhindered by the fact that his role in charge of compliance failed to prevent the collapse of these institutions. Indeed the collapse of ABLV suggests that he is already failing in his present role at the FCMC. However, an inability on his part would possibly benefit any oligarchs who might have questionable financial arrangements in Latvia.
A further curious element in Lagzdins’s career is the apparent willingness of the EBRD to ignore corruption in Latvia, while simultaneously berating Ukraine for its arguably no more corrupt financial system. Indeed Latvia’s banking system has often facilitated corruption in Ukraine. The country, which tried to promote itself as a “Switzerland on the Baltic”, has long acted as a conduit for Mafia funds in shell company accounts at Latvian banks. Equally it acted as a channel for North Korea in 2017, allowing that country to finance its ballistic missile programme in spite of US sanctions. Latvia has announced a crackdown on shell companies as part of a planned clean-up of its banking sector to address the concerns of the US. However, historically, Latvia has turned a blind eye to money laundering, despite having appropriate legislation in place.
Lagzdins’s role throughout his later career has apparently been to provide a respectable face for the country’s dirty banks. He may have worked on projects for the World Bank for a decade, possibly from 1993 until 2003, according to the FCMC site and other sources. Subsequently he became as Senior Vice President in charge of regulations and internal procedures at Latvia’s Parex bank. He commenced in post in either 2003 or 2004, leaving, or being discharged from, his job and the bank’s board in 2008 according to the annual reports of Parex bank. His job title confirms that he was responsible for the bank’s legal compliance. During this period he was presumably assuring the Parex board and external parties of the bank’s adherence to Latvian and international law. However, when the Spanish police arrested 20 Russian Mafiosi on 12 and 13 June 2008 the subsequent investigation exposed some of the bank’s links to the Tambov Mafia, a key element in Putin’s power. In particular it emerged that Mikhail Rebo, an alleged money launderer, might have been using the bank’s Berlin branch headed by his wife. If Lagzdins was arguing that the bank was compliant in this period it’s arguable that his assurances allowed the the bank to be utilised questionably leading, in part, to its collapse and nationalisation in 2008. However he was, of course, was provided with a golden parachute and drifted tranquilly away from the blazing carcass of Parex.
Lagzdins’s zoominfo profile outlines his impressive career
In 2009 the EBRD rescued the bank via a bizarre privatisation deal under which Latvia paid the EBRD to buy a stake in the bank, which Latvia then had the obligation to buy back. In 2010 Parex was split into two parts. A ‘good bank’ called Citadele, which was a new company, was created. A ‘bad bank’, called Reverta, was established. Reverta was the original company, it retained the bad assets, and changed its name.
However, Arnis is the kind of guy who doesn’t need an umbrella because he can dodge between the raindrops. He moved to Lithuania and became the Head of Compliance for Ukio Bank, possibly from 2009 onwards. 50% of the shares at Ukio bank were owned by Vladimir Romanov, an ethnic Russian and a Lithuanian citizen. He, some might allege, treated the bank, whose finances obviously relied on deposits from other people, as a personal piggy bank. The bank sponsored the Scottish team Hearts of Midlothian, which was owned by Romanov. Similarly it sponsored FC Kaunas, whose board included Romanov. Ukio would feature in the Panama papers as having been used by Sergei Roldugin, a Cellist and the Godfather to one of Putin’s daughters. Rodulgin is described by the Organised Crime and Corruption Reporting Project as the secret caretaker of Putin’s assets and is the Russian president’s closest friend. Some of the operations connected to Roldugin resembled classic money laundering techniques and were executed through Ukio.
Lagzdin’s period at Ukio coincides approximately with the period, 2007 to 2012, that it may have been a conduit for Putin’s money. In his defence it is, of course, hard to detect criminal activity, but he is meant to be an expert. The bank collapsed in 2013 after an inspection revealed that it had poor operating data and “poor asset quality.” Lithuanian law enforcement agencies, by contrast with Latvia where Parex’s oligarchic owners were seemingly left uninvestigated, moved to arrest the bank’s alleged looter. Romanov, who was accused of embezzlement, fled and was granted asylum in Russia.
The EBRD stepped in with Ukio, and purchased the assets in a transaction reminiscent of its bail out of Parex, whose assets had similarly proven “poor”, to rescue the bank. According to the transcript of a recorded statement, provided to me anonymously, the deal “was completely fraudulent. The EBRD purchased thegood assets of the bank via another bank it controlled. There were many irregularities, especially irregularities with accounting, because they made a loan with money which they didn’t have in the first place, they received government sort of, it was 230 million euros, they received it afterwards, and lent it back to the government… the media was silent.”
We could speculate that both these banks had been looted by oligarchs linked to Russia and Putin; and that in both cases Lagzdins was the unwitting front man. The EBRD’s support of Ukio, as of Parex, suggests an ugly willingness to gloss over criminality. In effect it was helping to mask the effects of oligarchs looting the banks and transfer the losses to the taxpayer. Latvia’s appointment of Lagzdins to its financial regulator, the FCMC, is the latest twist in a career which is simultaneously charmed while linked to some serious financial catastrophes. His role of assuring the US that the Latvian banking sector is now free of money laundering seems almost comically inappropriate.
However, his CV suggests that he might be a logical choice from the point of view of any oligarchs or mafia entities with financial arrangements in Latvia. He may well be a ferociously competent official plagued by bad luck. But Lagzdins should explain why the two banks where he was head of compliance collapsed and what actions he took to address their failure. I would happily publish details of any urgent, verifiable documents demonstrating his attempts to address the failures that led to the collapse of Parex and Ukio. Alarmingly it seems that the EBRD is complicit in propping up banks used as piggy banks by Putin’s buddies, while simultaneously berating Ukraine for corruption. There is no evidence that Lagzdins has any links to any oligarchs that might be interesting in light of the Parex and Ukio collapses. However, allegations of his son was linked to offshore structures connected to a Russian national emerged in 2015. Ivo Lagzdins, it was claimed, lived a life way beyond what his government salary as an official controlling access to government secrets would finance.
Latvian journalist Agnese Margevica alleged that Lagzdins’s son controlled offshore structures with Russian links in 2015
The ABLV bank’s entry into voluntary liquidation might ultimately reveal that, similarly to Parex and Ukio, it has “poor asset quality”, possibly loans to insiders at the bank issued on favourable terms without collateral. If the ABLV bank ultimately collapses will we learn the real reason for its failure? Will anyone be held to account, and will the EBRD step in again with a curiously structured arrangement which ultimately masks the truth of what is happening at ABLV? Will the EBRD continue its financial appeasement of the havoc wrought by eastern oligarchs, which is mirrored by Juncker’s desire to cosy up to Putin?
Russian shells will continue to fall on Donbas until the entirety of the EU, from its political leaders to its financial bodies, take a stand against Russian kleptocracy. The EBRD’s willingness to gloss over corruption mirrors the stance of the EU’s appeasers. They naively believe that they can reach a grand bargain with Russia which involves sacrificing Ukraine. But, ultimately, they are assisting Putin’s plan of transforming the EU into a club of managed democracies run by his Fascist vassals in which the rule of law is a charade for the poor.
Steve Komarnyckyj is a PEN award winning literary translator and poet whose work is published by Kalyna Language Press and features on the PEN World Bookshelf. You can e mail him on komarnyckyj.steve(at)gmail.com
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