Record Fine for Raiffeisen Bank Over Money Laundering Failures

Austrian regulators fined Raiffeisen Bank International over 2 million euros for lapses in money laundering controls, the largest fine ever by the country's Financial Market Authority. The penalty involved failings with two unnamed banks in Cuba and Bahrain. RBI intends to challenge the penalty in court, maintaining its anti-money laundering controls are adequate. U.S. authorities are also scrutinizing the bank's Russian ties.

Austrian regulators fined Raiffeisen Bank International for lapses in its money laundering controls, the country's Financial Market Authority said on Friday, imposing a record fine of just over 2 million euros ($2.1 million).

The penalty, the biggest ever to be awarded by regulators in Austria, was handed out after failings were found in RBI's money laundering and terror financing checks on two banks it was dealing with, the regulators said, without naming the banks or the countries where they were based. A person with direct knowledge of the matter said the banks in question were based in Cuba and Bahrain.

The punishment, albeit minor compared to penalties that could be imposed, further tarnishes Raiffeisen's image which has been under pressure for continuing to do business in Russia when Western peers have severed ties. RBI, which successfully reduced an earlier fine imposed for similar failings through legal action, said it would launch a court challenge to the penalty. "The allegations ... are unfounded," said a spokesperson, adding that it had proper anti money laundering controls.

Meanwhile, authorities in the United States continue to look into Raiffeisen's Russia links, with the potential for more serious harm to its business. Last month, Raiffeisen was warned by the U.S. Treasury in writing that its access to the U.S. financial system could be curbed because of its Russia dealings, Reuters has reported.

The warning was the strongest yet to the biggest Western bank in Russia and follows months of pressure from Washington, which has been looking into RBI's business in the nation for more than a year. While many Western governments and corporations have radically reduced ties to Moscow since it invaded Ukraine over two years ago, Austria remains linked with Russia through critical gas pipelines, with Vienna still serving as a hub for cash from Russia and its ex-Soviet neighbours.

RBI had vowed to spin off its Russian business, which provides a payment lifeline to hundreds of companies there, after coming under pressure from international regulators, but is dragging its heels. Italy's UniCredit also still retains a business in Russia. ($1 = 0.9340 euros) (Reporting By John O'Donnell Editing by Miranda Murray and Elaine Hardcastle)

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