FCMC: Latvian banks have taken substantial steps to improve internal control systems

06.01.2021
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In 2020, the Financial and Capital Market Commission (FCMC) carried out 12 inspections of banks in the area of the prevention of money laundering and terrorism and proliferation financing and concluded that generally banks had taken substantial steps to improve internal control systems. In previous years, most of bank inspections resulted in administrative proceedings and imposition of fines, while in 2020 there were only a few cases where the FCMC had to decide on administrative proceedings or the application of sanctions.

The FCMC’s priorities in combating financial crime for year 2020 were to strengthen the risk-based approach and contribute to building a common understanding of regulatory requirements for anti-money laundering and countering the financing of terrorism and proliferation (AML/CFTP) and the application of sanctions among the participants of Latvian financial sector, including the drafting and publication of a guide explaining issues on the basic payment account.

In 2020, the FCMC significantly changed its approach in carrying out full-scope inspections, focusing on in-depth review of elements of internal control system. Also in 2021, the FCMC will continue to improve the inspection methodology and effectiveness of its application in order to assess the effectiveness of credit institution internal control systems as far as objectively and qualitatively possible and to make recommendations for their improvement. The work on strengthening the application of risk-based approach to financial institutions will be continued as well.

In view of the increasing use of remote verification of customer identity by banks, during bank inspections in 2020 the FCMC reviewed how compliance with the Cabinet of Ministers’ regulations on remote identification was ensured, as well as identified best practices and shortcomings in the application of remote identification. Information provided by the banks will be used by the FCMC in drafting recommendations for banks on customer remote identification.

In addition, banks regularly submit to the FCMC their procedures for development of new products or services. Following an analysis of these procedures, the FCMC makes its recommendations to address deficiencies on a timely basis in order to ensure the effective setting up and implementation of internal control systems.

In 2020, the FCMC imposed fines of 2.03 million euro on three banks for violations of rules in the AML/CFTP area, as well as legal obligations aimed at addressing the deficiencies identified and improving banks’ internal control systems.

 

Further information:
Communications and Financial Literacy Division
Financial and Capital Market Commission
Phone: +371 67774808
E-mail: dace.jansone@fktk.lv

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