FCMC: Financial institutions shall ensure application of the sanctions imposed by the USA in accordance with the purposes thereof

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Today, on 12.12.2019, the Financial and Capital Market Commission (the FCMC) has sent a letter to the financial institutions of Latvia providing explanatory information in relation to the procedure of sanctions enforcement imposed by the USA on A. Lembergs and four legal entities – Ventspils Attīstības Aģentūra (Ventspils Development Agency), Biznesa Attīstības Asociācija (Business Development Association), Latvijas Tranzīta Biznesa Asociācija (Latvian Transit Business Association) and Ventspils brīvostas pārvalde (Ventspils Freeport Authority) – therefore, as of today, financial services shall be provided to the extent necessary to ensure making the payments required for carrying out the core activities.

Santa Purgaile, the Chairperson of the FCMC: These days the Financial and Capital Market Commission works hard in order to ensure that the sanctions imposed by the USA are applied in accordance with their purpose and nature. A letter has been sent to the financial institutions of Latvia, explaining what activities on the part of financial institutions should be considered as permissible within a period of 30 days, until 8 January 2020, and what additional measures should be taken in the context of such financial activities. It is clear that the purpose of imposing sanctions is to minimize Aivars Lembergs’ influence and control in order to prevent economic gains in his interests. However, at the same time the purpose of sanctions is not to have an adverse effect on the Latvian economy and business, insofar they comply with the regulatory enactments and good governance. Therefore, it is very important for the Latvian financial sector to ensure that sanctions are applied so that these two objectives are achieved as effectively as possible.”

The FCMC would like to draw attention to the fact that this is an unprecedented case in Latvia’s history; so far no citizen of Latvia has been included on the List of Sanctions of the US Office of Foreign Assets Control (OFAC). On 10 December 2019, the FCMC requested the participants of the Latvian financial market not to provide financial services to the sanctioned persons for a certain period of time, so the FCMC would be able to assess the situation and provide information to financial institutions regarding the sanctions enforcement procedure; however, as of today, financial services shall be provided to the extent necessary to cover the payments necessary for carrying out main activities.

Furthermore, the OFAC has issued Licence No 1, which requires the necessary measures to be taken to terminate cooperation with the sanctioned persons within 30 days, i.e. until 08.01.2020. During this period of time it shall be permitted in the accounts of the sanctioned legal persons to make both incoming and outgoing payments inherent in the core business of customers, including payments of salaries, benefits, and State fees, as well as incoming and outgoing payments in relation to the contracts concluded with the bank or any other natural or legal person within the framework of their commercial activities. Meanwhile, the financial institution has to perform enhanced due diligence on each payment; besides, the provision of any kind of new financial services shall not be permissible within this 30-day period.

The financial institutions are also informed that, considering the fact that respect for fundamental rights requires a person to be able to satisfy his/her primary needs, with regard to the sanctioned person A. Lembergs it is permissible to make payments necessary to meet primary needs (benefits, pension, payment of taxes and State fees, payment for food products, lease or mortgage, public utilities, expenses related to legal services etc.). In such a situation enhanced due diligence also should be performed, and the provision of new financial services should not be allowed.

In addition, the FCMC would like to draw attention that it is required to ensure that the requirements of sanctions are observed not only with regard to the persons directly mentioned in the list, but also any other legal persons under the control of the sanctioned persons. The FCMC emphasizes that in accordance with the effective regulatory enactments, Latvian financial institutions shall, on an ongoing basis, provide customer due diligence identifying the beneficial owners and supervising transactions, and take the necessary further actions on the basis of the information obtained.

Further information:
Communications Division of the FCMC
Phone: +371 67774808
E-mail: dace.jansone@fktk.lv



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