Dermot Desmond’s controversial Baltic bank lost more than a third of its deposits in the first quarter of this year as Latvia cracks down on Scottish and other international shell firms.

Rietumu banka, in which the Celtic shareholder has a one-third stake, has run in to a series of grave money-laundering scandals in recent years as it focused on often anonymous customers from the rest of the former Soviet Union.

However, this year it said it would no longer service accounts for shell companies, such Scotland’s notorious limited partnerships (SLPs), and their secret owners. Such customers between January and March withdrew some 900 million euros, 37.5 per cent of total deposits, Rietumu said this week.

READ MORE: Backlash from owners of Scottish firms told they are shells by Desmond bank

The bank’s moves come as Latvia effectively bans shell firms such as SLPs under pressure from authorities in the EU and US. Another Latvian bank, ABLV, was put in to liquidation earlier this year after America's Treasury Department accused it of using “institutionalised money laundering as a pillar of the bank’s business”.

Rietumu, on whose supervisory board Mr Desmond serves, was given a record criminal fine for money-laundering last year by a French court.

It has also been sanctioned by its own regulator after its accounts were used to launder North Korean money. 

Mr Desmond has never commented on controversies at the bank, which has two other major shareholders, but there is no evidence he was aware of any wrongdoing.


Riga, Latvia

Independent auditors, The Irish Times reported this week, say Latvian reforms on shell firms and non-resident banking raise “material uncertainty” over the future of Rietumu. The bank says it is refocusing its business and that is still trading in profit. Latvian media said the bank had more than enough liquidity to stay afloat, 10 times the country’s minimum requirement.

READ MORE: Backlash from owners of Scottish firms told they are shells by Desmond bank

As The Herald has already revealed, SLPs and other shell firms were openly marketed in the former Soviet Union along with accounts at banks such as ABLV or Rietumu.

The Financial and Capital Market Commission, Latvia’s financial regulator, said nearly a third of all shell companies with accounts at Latvian banks were British. It did not say how many were SLPs or other Scottish vehicles.