Standards for the prevention of money laundering and terrorist and proliferation financing
According to the international standards for the prevention of money laundering and terrorist and proliferation financing (Financial Action Task Force Recommendations, FATF), the state must identify, assess and understand its national money laundering and terrorist and proliferation financing (hereinafter – ML/TF/PF) risks and, based on this assessment, apply a risk-based approach to ensure that measures aimed at preventing or mitigating ML/TF/PF risks are proportionate to the significance of the identified risks.
The identification, assessment and understanding of ML/TF/PF risks is the basis for the creation and development of an effective system for reducing identified risks, which can be achieved by making and implementing appropriate policy decisions in the relevant areas, ensuring a risk-based approach, close cooperation between the public and private sectors, effective supervision and sanctions mechanisms for market participants in the supervised sectors as well as regular risk reassessment and updating.
Positive results of the MONEYVAL evaluation process
Latvia’s positive assessment in the 6th round of the MONEYVAL evaluation process: Latvia’s regulative acts in the field of the prevention of money laundering and terrorist and proliferation financing (hereinafter - AML/CFT/CFP) are fully compliant with FATF Recommendations, except for compliance with FATF Recommendation 25 (“Transparency and beneficial ownership of legal arrangements”), and Latvia’s AML/CFT/CFP system has received a high and significant rating in accordance with effectiveness indicators (five effectiveness indicators achieved a high rating, five - a significant rating and one – an average rating). In total there are 11 effectiveness indicators used by the FATF to assess how effectively a country’s AML/CFT/CFP works in practice; known as Immediate Outcomes.
The MONEYVAL 6th round evaluation report on Latvia.
The positive results confirm that the reforms implemented are working and providing a predictable, internationally standardized, and legally stable environment for investors. This is clear confirmation of Latvia’s persistent work in preventing financial crime and establishing an effective supervisory system. Latvia is the first country to voluntarily participate in the MONEYVAL assessment under the new FATF methodology.
ML/TF/PF risk assessment
A national ML/TF/PF risk assessment is carried out to provide institutions involved in preventing and combating ML/TF/PF, as well as the public, with useful information on identified ML/TF/PF risks and weaknesses in the AML/CFT/CFP system. Such an assessment, based on the identified risks, allows for increased resource efficiency in mitigating and preventing the identified risks, as well as improving the understanding of the institutions involved and the public about the risks and negative consequences of ML/TF/TP risks.
The latest national ML/TF/TP risk assessment was carried out for the period from 2020 to 2022 (hereinafter - ML/TF/TP risk assessment), which was developed with the participation of all competent authorities, supervisory and control authorities, and the private sector, identifying and assessing ML/TF/TP risks in Latvia.
During the review period of ML/TF/TP risk assessment, the AML/CFT/CFP system was reformed and resources were allocated for its implementation in accordance with the Action Plan to enhance the capacity and capabilities of the competent authorities in the field of the AML/CFT/CFP, has ensured a targeted and effective AML/CFT/CFP policy, which has resulted in a significant reduction in ML/TF/TP risks and vulnerabilities during review period of the ML/TF/TP risk assessment.
During the review period, awareness of ML/TF/TP risks has been significantly increased and standardized at all stages of the AML/CFT/CFP system. Based on ML/TF/TP risk assessment, ML/TF/TP risk mitigation measures developed and implemented during this review period have significantly reduced ML/TF/TP risks preventing the use of Latvia’s financial system for ML/TF/TP purposes. Cooperation between competent authorities in the field of the AML/CFT/CFP, based on structured coordination mechanisms and active use of international cooperation, has significantly increased the effectiveness of AML/CFT/CFP, ensuring that Latvia is able to stop the flow of criminally obtained funds, investigate complex ML/TF/TP schemes and, as a result, confiscate criminally obtained funds.