"The Financial Supervision Authority carried out an on-the-spot check at AS LHV Pank to determine whether its anti-money laundering and counter-terrorism funding systems and internal rules when offering other financial institutions services were in accordance with the law," the watchdog said Tuesday. "The FSA also analyzed whether the bank's AML and counter-terrorism funding systems and rules are enough to manage additional risks created in correspondent banking. Shortcomings were found in AS LHV Pank's AML/CFT controls and business relations monitoring."

The FSA said that LHV fell short in the fields of establishing business relations and their monitoring, as well as its obligation to store data.

The watchdog issued a precept, obligating the Estonian bank to perfect its AML/CFT risk control systems.

Kilvar Kessler, head of the authority, suggested that it was LHV's rapid growth coupled with a high-risk environment that led to deficiencies and violations at the bank.

"Rapidly developing payments intermediaries could experience a situation where their risk management side fails to keep up with growth. That is when FSA supervision can remind banks that risk management requires attention and investment. LHV Pank has pursued constructive cooperation with us and is taking measures to rectify the deficiencies. We will be monitoring the process closely," Kessler remarked.

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