Computer Crime Research Center


Pirates of the Baltic

Date: March 21, 2005
Source: Transitions Online
By: Aris Jansons

RIGA, Latvia--A cybercrime incident involving a big Latvian bank has again highlighted the country's reputation as a haven for money launderers and online scammers. But it's pressure from the United States that is more likely to lead to real change in the Latvian banking system.

The cybercrime story broke in February, when a businessman from Florida, Joe Lopez, filed a complaint against the U.S. based Bank of America over an unauthorized transfer of $90,348.65 from his Bank of America business account to Parex Bank of Latvia. He says the crooks used a computer virus known as "coreflood" to gain remote access to his online banking records, and that Bank of America was negligent in failing to warn him about the virus risk.

According to his complaint, $20,000 was withdrawn by the fraudulent recipient. The rest of the funds were frozen by Parex, the South Florida Sun-Sentinel reported.

The banking world was intrigued, because the case could set a precedent, making banks responsible to protect their online customers from known risks. But in Latvia, the problem is not so much the banks' vulnerability to hackers as their tendency to accept large deposits from clients with murky backgrounds.

The Florida paper's reporter, Ian Katz, wrote that Internet security experts think a third to a half of all online financial crime schemes are run from Eastern Europe and the former Soviet republics, many with backing from organized crime.


About the same time Lopez filed his complaint in Miami, Latvian Prime Minister Aigars Kalvitis vowed to take a tougher line on the country’s two dozen banks to avoid international sanctions. He told the press he would lead a new effort to prosecute and prevent money laundering.

"Signals from the [United States] and elsewhere about suspected money laundering in Latvia have intensified in recent months," Kalvitis said at a January news conference. "If we don't take action, Latvia could lose a large part of its banking business and even face sanctions." The prime minister, who took office in December, said that signals from Washington in particular had been intensifying in the past few months.

The New York branch of the Dutch banking major ABN AMRO reportedly stopped doing business with dozens of Russian and Eastern European banks last year after the U.S. Federal Reserve said it was improperly moving funds of dubious origin through the U.S. financial system, The Wall Street Journal reported in September. The paper said its links with Latvian banks were of particular concern to U.S. officials.

Kalvitis announced the formation of a new body made up of central bank officers, prosecutors, and judges to fight money laundering and said he would lead it personally.

Since the start of a campaign against money laundering, Latvian financial institutions have closed dozens of accounts, many with Russian and Ukrainian banks, the prime minister’s economic adviser, Aigars Stokenbergs, said, adding, "The government may shut down some smaller lenders following U.S. pressure for a crackdown on money laundering."

Stokenbergs had earlier said that international sanctions against Latvian banks could force a dozen or more out of business, and delay the country's adoption of the euro, the Latvian paper Diena reported on 27 January.

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