The FCMC has issued a new general license to Latvian banks

19.08.2022
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In order to ensure that persons who are not targeted by international sanctions that have been imposed against Russian Federation and Belarus would not be negatively affected the Financial and Capital Market Commission (hereinafter - the FCMC) on July 27, 2022 issued a new general license to Latvian financial institutions.

The general license permits financial institutions to make payments that are necessary for satisfying basis needs and expenses for basic economic activities of sanctioned individuals and entities. The general license does not permit making a payment without evaluating if the payment complies with the applicable sanctions’ regulations. The general license aims to ensure that a payment, which can be made on the basis of this general license, is not delayed for the purpose of acquiring a separate license from the FCMC.

The general license issued on July 27, 2022 specifies the list of basic needs in order to eliminate doubts about the permitted payments such as payments for electricity, distribution services, pension payments, land lease. The list of basic needs has been supplemented with electronic communication services. Additionally, the general license issued on July 27, 2022 allows payment of remuneration to officials of legal entities and allows the collection of commission fees for maintaining and servicing bank accounts.

The general license has been issued by the FCMC on the basis of Paragraph 21 of the FCMC’s Regulation No. 126 of August 11, 2020 “Sanctions’ Risk Management Normative Regulations” (hereinafter – the Regulations No. 126) that foresees that the FCMC has the authority to issue a general license for the application of the exceptions specified in the Paragraph 19 of the Regulations No. 126.

Basis needs of natural persons

By issuing this general license the FCMC allows participants of the financial and capital market who have received a respective application for a financial transaction, without obtaining a separate FCMC’s license, to provide a financial service that involves a natural person, in respect of whom financial restrictions have been imposed in accordance with the sanctions’ regulations of the European Union (hereinafter – the EU) or member states of the NATO and who is connected to a member state of the EU or the European Economic Area (hereinafter – the EEA), and which are necessary for satisfying the following basic needs of such natural person and basis needs of his/her dependent family members:

  • food;
  • housing rent;
  • mortgage payments and credit interest payments;
  • medicines and medical services;
  • taxes and state fees;
  • insurance in mandatory types of insurance;
  • utility payments (including transactions for refunding overpayment, electricity, natural gas, distribution, transmission and subscription services for natural gas and electricity or related services, and services related to property management);
  • alimony to ensure the needs of a child;
  • salary payments;
  • receipt of state social benefits, old-age and other pensions, and equivalent payments;
  • payment of electronic communication services (including payment for services that are proportional to the basic needs and are related to receipt of such services, but which do not transfer ownership of new resources to the natural person).

Expenses of basis economic activity of a legal entity

By issuing this general license the FCMC allows participants of the financial and capital market who have received a respective application for a financial transaction, without obtaining a separate FCMC’s license, to provide a financial service that involves a legal entity, in respect to which financial restrictions have been imposed in accordance with the sanctions’ regulations of the EU or member states of the NATO and that is connected to a member state of the EU or the EEA, and the receiving of the financial service is reasonably necessary for covering expenses of basis economic activity of such legal entity as far as such financial service is strictly necessary for the legal person to continue to exist:

  • taxes;
  • mandatory state fees;
  • state social insurance contributions;
  • salary and other mandatory payments resulting from employment relations (sickness allowance, vacation compensation, severance pay, etc.) of employees who are residents of Latvia or another EU member state, on a condition that the payable (calculated) amount of the monthly gross payments resulting from employment relations do not exceed 5,000 euros per employee;
  • compensation for officials of legal entities – residents of an EU member state who are not employed on the basis of an employment contract, but for whom a compensation for the performance of work duties have been determined in accordance with the Commercial Law, and the tax payments applicable to the payment of the compensation, on a condition that the payable (calculated) amount of the monthly gross compensation does not exceed 5,000 euros per official and that the compensation corresponds to or does not significantly exceed the amount of compensation that the relevant official received before financial restrictions were imposed against the legal entity, on the condition that the transfer of funds to the payment recipient is not prohibited in accordance with the applicable sanctions’ regulation of the EU and NATO’s member states;
  • expenses necessary for the preparation of annual reports, accounting, tax reports, on the condition that the amount of expenses corresponds to or does not significantly exceed the amount of expenses that the relevant legal entity paid for the mentioned services before financial restrictions were imposed against it, and on the condition that the transfer of funds to the payment recipient is not prohibited with the applicable sanctions’ regulation of the EU and NATO’s member states;
  • payments for mandatory types of insurance, on the condition that the amount of such expenses corresponds to or does not significantly exceed the amount of expenses that the respective legal entity paid for the said services before financial restrictions were imposed against it, and on the condition that the transfer of funds to the payment recipient is not prohibited in accordance with the applicable sanctions’ regulation of the EU and NATO’s member states;
  • expenses for utility services (including transactions for refunding overpayment, electricity, natural gas, distribution, transmission and subscription services for natural gas and electricity or related services, and services related to property management);
  • expenses for renting premises and land corresponding to the sanctions applied, provided that the amount of such expenses corresponds to or does not significantly exceed the amount of expenses that the relevant legal entity paid for the said services before financial restrictions were imposed against it, and on the condition that the transfer of funds to the payment recipient is not prohibited in accordance with the applicable sanctions’ regulation of the EU and NATO’s member states;
  • expenses for electronic communication services (including payment for services that are proportional to the basic needs and are related to receipt of such services, but which to do not transfer ownership of new resources to the legal entity).

Payments for credit obligations

By issuing this general license the FCMC allows participants of the financial and capital market who have received a respective application for a financial transaction, without obtaining a separate FCMC’s license, to provide a financial service that involves a natural person or legal entity, in respect of which financial restrictions have been imposed in accordance with the sanctions’ regulations of the EU or member states of the NATO and that is connected to a member state of the EU or the EEA, and the receiving of the financial service is reasonably necessary for payment of credit obligations, which the natural person or legal entity, against whom financial restrictions have been imposed, has undertaken before the natural person or legal entity was sanctioned. Condition – the transfer of funds to the payment recipient is not prohibited in accordance with the sanctions’ regulations of the EU and NATO’s member states.

Deduction of commission fees for financial services

The FCMC allows participants of the financial and capital market, without obtaining a separate license from the FCMC to deduct commission fees, including a previously calculated but not withheld commission fees, from a client against whom financial restrictions have been imposed in accordance with the sanctions’ regulation of the EU and the NATO member states in the following amount:

  • standard commission fee – a standard commission fee for simple servicing of all accounts of such client, transactions in accounts and services related to customer service, which the institution withholds in accordance with the contract concluded with the client and which was also applied before financial restrictions were imposed against the relevant client;
  • additional commission fee – a commission fee, the determination and application of which is directly justified with the necessity to comply with the respective regulations of financial restrictions imposed against the client and justified with the institution’s price list, for example, justified by the need to perform additional customer due diligence measures, to perform enhanced monitoring of transactions or other specified actions required in order to comply with the sanctions’ regulations determined in the normative legal acts or in institution’s internal procedures.

At the same time, the FCMC expects that before execution of each transaction the financial institution will carry out additional inspections to assess whether the provided service complies with this general license and with exceptions determined in the Regulations No. 126, and that the transaction has no indications of sanctions’ circumvention or indications of a suspicious transaction.

For execution of transactions that do not meet the objectives listed in this general license, but in the opinion of the financial institution complies with the exceptions specified in the Paragraph 19 of the Regulations No. 126 or exceptions determined in the applicable EU legislation, it is necessary to obtain a separate license from the FCMC. When applying to the FCMC to receive a license the financial institution must submit an assessment that the particular transaction complies with the exceptions determined in the Paragraph 19 of the Regulations No. 126 and, if relevant, to the exception set out in the applicable EU legislation.

The previously issued general license of March 11, 2022 was terminated by issuing this new general license of July 27, 2022.

Contacts


Address:
Kungu iela 1, Riga, LV-1050
Phone:
6 7774800
E-mail:
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