On Friday, February 21, the Financial Action Task Force (FATF) announced that Latvia has established a strong and robust financial crime prevention system and will not be subject to "enhanced supervision" or included in the so-called "greylist".
“The ambitious work on adjusting the regulation of financial sector, as well as its supervision and control, has paid off! The decision not to be the subject to enhanced supervision will serve as an incentive for us to continue our work aimed at economic development and supporting business. Credit institutions are provided with all the prerequisites to continue to work with a clear awareness of specific risks for Latvia and to contribute to the growth of our country,” says Jānis Reirs, Minister of Finance.Useful information? Share!
The financial sector needed a "major overhaul" in order to strengthen the prevention of money laundering and terrorist financing and to achieve full compliance with the international standards in this area. The arrangement of the financial sector and further work on financial crime prevention would not be possible without the efforts of all parties involved.
In order to ensure a transparent, sustainable and safe operation of the financial sector in Latvia, laws on the financial sector’s “major overhaul” - amendments to the Financial and Capital Market Law and the Law on Credit Institutions - were drafted and approved. These legislative changes are considered to be one of the most ambitious financial sector reform programs in Europe to date, and they confirm Latvia’s commitment to a stable and transparent financial sector as a basis for sustainable growth and prosperity for all the citizens of Latvia.
The Latvian authorities are paying constant attention to strengthening supervision in the area of money laundering, terrorist financing, and proliferation financing (AMLTPF). Changes in the regulatory framework have strengthened the risk-based approach to supervision in all supervisory and control authorities; the capacity of all of these authorities also has been increased. The supervisory authorities use specific risk identification and profiling matrices to identify the highest risks to the sector and refocus resources on the riskiest supervised entities. The number of on-site inspections has been increased for targeted monitoring.
Risk mitigation and consolidation in the banking sector is an essential part of the AMLTPF strategy. The amendments to the law prohibit companies from doing business with shell companies that do not have legal entity commitments with their actual economic activities and for which the legal entity is incorporated in a country where the regulations do not require financial reporting.
In 2019, amendments were made to the law on the declaration of cash at the state border in order to prevent importation or exportation of undeclared or illegally acquired cash from Latvia. The amendments included conditions for declaring undeclared or criminally acquired cash at the internal border of the country, specifying the extent of the information to be given on the cash declaration form at the request of the official of the competent authority.
Following the evaluation report of the 5th round of Moneyval, Latvia has taken a number of actions to improve its AMLTPF system, in particular the awareness of risks and the adequacy of the subjects of the law. Additional resources and more effective monitoring allowed the improvement of the compliance of the law subjects, their level of risk awareness, and the effectiveness of the applied preventive measures.
In December of last year, the technical compliance progress report submitted by Latvia was discussed in the Moneyval plenary; the report provided information and an expert assessment of Latvia's progress in developing the regulatory framework to comply with the 40 recommendations of FATF. The implementation of these recommendations in each country's regulatory framework provides a solid basis for an effective anti-money laundering and terrorist financing prevention system. Following the evaluation of the progress report, 7 out of 40 FATF technical compliance recommendations are currently rated as fully compliant and 33 as largely compliant.
FATF is an independent intergovernmental organization that develops and promotes policies to protect the global financial system from money laundering, terrorist financing, and financing the distribution of weapons of mass destruction. FATF recommendations are considered to be the world standard for anti-money laundering (AML) and the prevention of terrorist financing.
FATF currently has 39 members and one observing country. Members of FATF’s decision-making body meet three times a year in a plenary session.