2 August 2018
Information to the media
FCMC: The Latvian Banking Sector Has Got Rid of Unwelcome Shell Companies
The Financial and Capital Market Commission (hereinafter – FCMC) has summarised the Latvian banking sector data regarding the cleansing of the customer base from high-risk shell companies that conform to two characteristics of shell companies. Already earlier revising the customer base, in particular since the new regulation took effect in 2018, the number of such companies had dynamically decreased, and by 7 July 2018 (the set deadline) the balance of deposits of these customers was 0.03% of the total amount of deposits (the rest bad deposits were mostly frozen money).
On 9 May 2018, amendments to the Law on the Prevention of Money Laundering and Terrorism Financing took effect, imposing requirement on the financial sector market participants in Latvia, within 60 days, to discontinue cooperation with companies that meet two features of the shell companies, i.e. lack of documented proof of real business activity (therefore no economic value) and the regulatory requirements of the country of incorporation do not request submission of annual financial statements.
According to the FCMC Chairman Pēters Putniņš, “Now we can say with assurance that our banks have completed their work. The remaining 0.03%, or EUR 4.5 million, is the outgoing cash flow or the frozen cash in blocked accounts, where the origin of the cash still requires examination. We see that the work started in 2016 is ongoing; the share of risky bank customers is shrinking every day, as banks are giving up their business with the shell companies that is not banned but may involve unnecessary risks. We may conclude that as regards shell companies of various types, not only the prohibited ones, about EUR 1.5 billion flew away from the Latvian banking sector in the first half of this year. The business has been terminated with over 9000 shell companies of various types.”
As of the end of July, the share of foreign resident deposits in Latvian banks, including from the EU, was 21%. The geographical structure of the deposits shows that domestic deposits predominate in Latvia with 79% of total deposits.
See in attachment: updated FCMC infographics “Change Management in the Banking Sector in 2015 – 2018”: link:
AML Law; Transitional Provisions 32:
32. Credit institutions, payment institutions, electronic money institutions, investment firms and — in relation to the individual portfolio management and distribution of UCITS fund certificates — also investment management companies shall terminate business relation and incidental transactions with the clients — shell corporations that conform to characteristics defined in Article 1 (15.1), sub-clauses a) and b) hereof within 60 days of the entry into force of Article 21.1 of this law.
(Wording of 26 April 2018, became effective on 9 May 2018)
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