Banking & Finance (#5 May 2018)

Latvian ABLV Bank working with CIS to be liquidated

On 26 February 2018, shareholders of the Latvian ABLV Bank adopted a decision on its liquidation at their extraordinary meeting.

Capital outflow from the loans institution began after the report by the US Financial Crimes Enforcement Network (FinCEN) on the intention to introduce sanctions against ABLV Bank for implementing money laundering schemes assisting the North Korean nuclear program and illegal activities in Azerbaijan, Russia and Ukraine. As a result, EUR 600million was withdrawn from the bank.

ABLV turned to the Latvian state for assistance. As a result, the Bank of Latvia granted a EUR 297.2 million loan against a pledge of securities.

Inevitably, Ukrainian companies, serviced by ABVL, faced the problem of transferring their accounts. After the tightening of regulatory procedures and requirements for banks, it is becoming more and more difficult for a non-resident to open an account in European jurisdictions. Previously, the liberal Latvian jurisdiction enjoyed great popularity among CIS residents for capital accumulation and preservation.

According to Elena Sotnyk, chief operating officer at Concorde Capital Investment Company, ABVL clients are trying to find a solution to the problem by considering other jurisdictions Cyprus, the Czech Republic, and Malta. The return of capital from any bank undergoing the liquidation process is a difficult task and requires a comprehensive approach. At the same time, it is necessary to act quickly and decisively, otherwise the process can linger on for years and the client risks losing their entire savings. To carry out this or that transaction, all mechanisms allowing it to be performed smoothly should be adjusted.

Client assets, which we have to work with, can roughly be divided into several categories. In particular, these are securities (documents) and monetary funds. The transfer of securities can be performed to other depositaries, and in this case the main feature is availability of the clients second custody account, to which securities can be accepted. By the way, we can help with opening such an account quickly enough. With monetary funds, the situation is more complicated, as the opening of the second personal or corporate bank account may take months. A client has a short period of time to transfer funds to an account in another bank, and its good if such an account exists. There are cases often when a client has only one savings account. However, the existence of an account does not guarantee success, because there is a risk that the second receiving bank will return the transfer to its sender, commented Mrs. Sotnyk.

In the process of return/transfer of personal savings (assets), a depositor may face a lot of obstacles, starting from delays in processing an application right up to rejection of the latter. At the same time, bank employees may refer to various internal/external decisions, regulations or standards.

Even if the clients application is accepted for processing, or has already been processed and the bank is ready to send the assets under the instruction, it is only one aspect of the case, Mrs. Sotnyk explained. Furthermore, it is necessary that the receiving party does not reject the payment/transfer instruction, since most banks and depositaries are reluctant to accept assets from banks which have problems. There are many pitfalls that can be faced in such a difficult situation.

Concorde Investments (Cyprus) Ltd., which belongs to the Concorde Capital group of companies, offers securities transfers and holding. We have developed and tested a comprehensive solution allowing the transfer of a clients assets from a problem bank to safe storage places. After opening an account (broker a/c) with us we, together with our partners, carry out preparatory and support work. As a result, a clients chances of success are significantly increased. At the same time, the clients participation is reduced to a minimum. Unfortunately, no-one can give a 100% guarantee for such transactions. We analyze each specific case, and if following the results of analysis we see at least the slightest chance of success, we suggest making use of our capabilities and experience. Here, experience of working with distressed assets is extremely important, Elena Sotnyk summed up.

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