Countries/Jurisdictions of Primary Concern - Latvia
Latvia is a regional financial center with a large number of commercial banks and a sizeable non-resident deposit base. Total bank deposits have increased in the past year, with non-residential deposits increasing by almost 15 percent, comprising 49.8 percent of total bank deposits. Non-resident cash continues to flow across the border from neighboring Russia and former Soviet states. Latvia’s geographic location, large untaxed shadow economy (approximately 24 percent of the overall economy), and public corruption make it challenging to combat money laundering.
Officials do not consider proceeds from illegal narcotics to be a major source of laundered funds in Latvia. Authorities report that the primary sources of money laundered in Latvia are tax evasion; organized criminal activities, such as prostitution and fraud perpetrated by Russian and Latvian groups; and other forms of financial fraud. Officials also report that questionable transactions and the overall value of laundered money have remained below pre-financial crisis levels. Latvian regulatory agencies monitor financial transactions to identify instances of terrorism financing.
There is a black market for smuggled goods, primarily cigarettes, alcohol, and gasoline; however, contraband smuggling does not generate significant funds that are laundered through the official financial system.
Four special economic zones provide a variety of significant tax incentives for manufacturing, outsourcing, logistics centers, and the transshipment of goods to other free trade zones. The zones are covered by the same regulatory oversight and enterprise registration regulations that exist for other areas.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO
KYC covered entities: Banks, credit institutions, life insurance companies, and intermediaries; private pension fund administrators, investment brokerage firms, and management companies; currency exchange offices, payment service providers or other money transmission or remittance offices, and e-money institutions; tax advisors, external accountants, and auditors; notaries, lawyers, and other independent legal professionals; trust and company service providers; real estate agents or intermediaries; organizers of lotteries or other gaming activities; persons providing money collection services; EU-owned entities; and any high-value goods merchant, intermediary, or service provider
Number of STRs received and time frame: 4,299: January 1 - June 30, 2014
Number of CTRs received and time frame: 3,590: January 1 - June 30, 2014
STR covered entities: Banks, credit institutions, life insurance companies, and intermediaries; private pension fund administrators, investment brokerage firms, and management companies; currency exchange offices, payment service providers or other money transmission or remittance offices, and e-money institutions; tax advisors, external accountants, and auditors; notaries, lawyers, and other independent legal professionals; trust and company service providers; real estate agents or intermediaries; organizers of lotteries or other gaming activities; persons providing money collection services; any high-value goods merchant, intermediary, or service provider; and public institutions
money laundering criminal Prosecutions/convictions:
Prosecutions: 10: January 1 - September 30, 2014
Convictions: 6: January 1 - September 30, 2014
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Latvia is a member of the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation report can be found at: http://www.coe.int/t/dghl/monitoring/moneyval/Countries/Latvia_en.asp
Enforcement and implementation issues and comments:
In 2014, Latvia joined the Eurozone bloc. On August 13, 2014, the Latvian Parliament acted to enhance the Law on the Prevention of Money Laundering and Terrorism Financing. The amendments are largely minor changes in legal definitions or procedural norms in order to ensure consistency and compliance with international standards.
Under Latvian law, foreign politically exposed persons (PEPs) are always subject to enhanced due diligence procedures, but domestic PEPs are not. The Financial and Capital Market Commission (FCMC) reports it is awaiting final approval of European Parliament regulations, providing that the rules on PEPs be extended to domestic PEPs, in order to pursue Latvian legislation in line with those regulations.
On May 31, 2013, at the request of the Bureau to Prevent and Combat Corruption Prevention (KNAB), the Prosecutor General’s Office (PGO) brought criminal charges against former Riga City Council Housing and Environment Department Chief Arija Stabina for accepting bribes. KNAB arrested seven people, including Stabina and two other Riga City Council employees. KNAB has accused the Riga City Council officials of accepting bribes from residents in exchange for placement in municipal housing. Stabina was released on bail, but since June 2013, authorities have been unable to locate her. On July 22, 2013, the PGO issued a European Arrest Warrant for Stabina. On June 12, 2014, the PGO reported that Stabina’s case has supported several other criminal cases, in which six people have been convicted of bribery, bribery support, and bribery appropriation.
During 2014, KNAB initiated additional high profile investigations against government officials. In April, KNAB started an investigation for bribery against the Riga City Council Cemetery Administration Chief. On November 10, KNAB had enough evidence and requested the PGO to bring criminal charges against him. On November 12, KNAB passed to the PGO materials to bring criminal charges against seven people for bribery of state officials, misuse of authority for personal enrichment and fraud in the amount of 850,000 euros ($1.06 million). Also on November 12, KNAB officers detained a Riga Regional Court (RRC) Civil Cases Panel judge after searching RRC offices. On November 14, the judge was declared a suspect in a criminal case. KNAB’s investigation is ongoing; no criminal charges have been brought to date.
Latvian banks continue to invest substantially in their IT systems to develop programs for identifying suspicious activities, especially with regard to high-risk clients. The FCMC should continue its work to strengthen its capacity by increasing its human and financial resources, specifically for AML purposes.