Latvia tightens AML framework

Latvia’s central bank has announced it is tightening a range of regulations as the country’s authorities seek to toughen their anti-money laundering regime.

The Bank of Latvia said the measures would help ensure the implementation of the Latvian government’s action plan to strengthen AML regulations. The Latvian government’s plan followed recommendations from the Council of Europe’s AML committee of experts, known as Moneyval. The new measures will take effect today (April 1).

The new amendments tighten the restrictions around fake currency and beneficial ownership. Under the superseded regulations, Latvian-based financial firms only had to refuse to accept fake currency from customers, the central bank said. Under the amended regulations, fake currency will have to be withdrawn from circulation and handed over to the central bank.

Under the previous regulations, companies had to give the Bank of Latvia information about large shareholders. Those regulations have now been tightened to oblige institutions to give the central bank information about their beneficial owners, who might not be large shareholders.

Rules on the sale or purchase of foreign exchange in cash have also been tightened, the central bank said. The Bank of Latvia said financial companies would have to take account of sectoral restrictions introduced to prevent money laundering and the financing of terrorism or weapons proliferation.

String of scandals

Latvia’s financial regulators and its government are struggling to deal with a series of recent allegations of money laundering and other malpractice.

The Latvian government on March 26 announced plans to replace the entire board of the country’s financial regulator, the Financial and Capital Market Commission (FKTK), several years before their terms expire. The FKTK’s head, Peters Putniņš, told locally-based reporters that the proposed change would take away the regulator’s independence.

The governor of the Bank of Latvia, Ilmārs Rimšēvičs, is awaiting trial on charges of extorting bribes from commercial banks in return for favourable regulatory decisions. Latvian police arrested him in February 2018. He strongly denies the charges.

Rimšēvičs continues to serve as governor of the Bank of Latvia. The European Court of Justice ruled that Latvian authorities had not presented evidence of wrongdoing before effectively removing him from the post last year. The European Central Bank last month took over the direct supervision of the small Latvian commercial lender that accused Rimšēvičs of wrongdoing.

Latvia’s third-largest commercial lender ABLV was closed by the ECB, also in February 2018, after the US Treasury publicly accused it of massive money laundering.  

The US authorities accused it of having “funnelled billions of dollars in public corruption and asset stripping proceeds through shell company accounts”. The bank was linked to North Korea’s efforts to buy and develop ballistic missiles, as well as to corrupt “politically exposed persons” in Russia, Ukraine and Azerbaijan, US Treasury undersecretary Sigal Mandelker said.

Another Latvian commercial lender, Rietumu, was fined €80 million ($90 billion) by a French court in 2017 after being found guilty of money laundering.