Joint statement of Financial and Capital Market Commission (FCMC) and Control Service (Latvian Financial Intelligence Unit)

18.02.2015
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It is no secret that part of Latvian banking sector operates as the regional financial centre servicing non-resident cash flow. However, not only benefits are associated with such banking business model but also certain risks, addressed also by international experts, at the same time highlighting the progress in managing these risks1. Therefore, timely identification and appropriate management of these risks are among the key tasks for both the market operators and regulatory institutions.

The authors of the publication “An Examination of Regulatory and Institutional Effectiveness in Combating Money Laundering” also emphasize one of such risks – a possibility that Latvian banks have been allegedly involved in attempts of money laundering. Though admitting that the Latvian regulatory framework meets all the international standards, the authors of the publication point out that above measures do not prevent the possibility of illegal transactions with customers from Eurasia through local banks. 

We do not deny risks associated with money laundering, but cannot agree a common position of the publication and its conclusions on the quality of financial sector supervision. Attempts to use banks in money laundering transactions have been observed on a global scale, however  there is still no way found in any country worldwide how to fully protect the banks from engaging them in illicit transactions. This is one of the risks inherent in bank activities and much attention is devoted to efficient risk management both from banks and regulatory authorities.

Making every effort to ensure adequate risk management, Latvian responsible authorities continue to work efficiently on facilitating further development of supervisory framework, ensuring an ongoing monitoring of the activities of market participants, latest trends and developments in the sector as a whole. Much of what has been done over past years also gives evidence, but it has not been properly taken into account in the publication:

  • The publication emphasizes that so far “modest” fines have been imposed on banks for violations in the money laundering area and points to non-disclosure of penalized market operators. The authors of the publication have disregarded that the former procedure for information disclosure on the sanctions applied to the market operators was changed in 2014. To increase transparency of decision making in supervisory process FCMC makes public the name of credit institution, the type and nature of offence, the sanction applied, information on appeal status and consequences, as well as additional obligations imposed on the bank.
  • The new procedure envisages also a material increase in maximum fine for certain infringements, previously it was 100 000 lats (142 297 euro). As from 2014 for certain types of infringements the regulator is entitled to impose a fine up to 10% of the total annual net turnover (depending on the net turnover of certain banks the amount may range from several thousand euro up to several tens of millions euro). 
  • Overall, in the last five years FCMC conducted 76 inspections of credit institutions. As a result of inspections, on 22 occasions sanctions were imposed for violations of the Law on the Prevention of Laundering the Proceeds from Criminal Activity (Money Laundering) and of Terrorist Financing, including penalties for the total of more than 775 thousand euro.
  • With reference to the latest report of MONEYVAL, the authors of the publication have used information published in 2012, when the Committee approved the report on compliance of the Latvian anti-money laundering and anti-terrorist financing system with international standards (FATF Recommendations) and gave recommendations for further strengthening of the system. After having examined the report on the two-year performance in Latvia and measures that have been taken to meet the recommendations, in September 2014 experts again reapproved Latvia’s progress in the development of financial sector supervision: http://www.coe.int/t/dghl/monitoring/moneyval/Activities/Activity_reports_en.asp (See document of the September of 2014 meeting, p. 15).
  • Referring to the lack of reliable statistics on suspicious and unusual transaction reports is not precise as Latvian FIU keeps such publicly available statistical information: http://www.prokuratura.lv/public/30252.html. According to these data, e.g., in 2013 FIU received 17168 reports more than a half of which came from banking sector. Later part of these reports becomes a material sent to law enforcement institutions for further investigation. In addition Latvian FIU has issued 126 orders to freeze suspicious funds.

 1  International Monetary Fund report: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21029.0
Report of the Council of Europe Committee of experts on the evaluation of anti-money laundering measures and the financing of terrorism (MONEYVAL):
http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/round4/LTV4_MER_MONEYVAL(2012)16_en.pdf

Further information:

Marija Makareviča
Head of Communications Division
Financial and Capital Market Commission
Telephone: +371 67774808; +371 26893967
marija.makarevica@fktk.lv

Viesturs Burkāns
Head of Control Service (Latvian Financial Intelligence Unit)
Tālr. +371 67044431
viesturs.burkans@kd.gov.lv

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