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Wednesday 21.03.2018 | Name days: Una, Unigunde, Dzelme, Benedikts

Delna: transparency would help improve Latvia’s international reputation

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUAssociation for openness – Delna invites the Latvian government to prohibit banks from servicing dead-end companies and provide free access to the registry of true beneficiaries in Latvia, as well as reduce the threshold for true beneficiaries from 25% to 10 or introduce a threshold adapted to the sector by establishing certain requirements for politically important persons.

Delna also invites the government to introduce a mechanism for identification of nominal directors in the registry, develop licensing rules for service providers in the non-finance sector and restrict them from working with legal persons that ensure secrecy for true beneficiaries and money laundering.

«The recent shock struck upon Latvia’s international reputation turns attention away from the full spectrum of problems created by high-risk client servicing activities by Latvian banks. Promises from the prime minister and finance minister to reduce risky transactions with non-residents are welcome. However, introduction of a tax on cooperation with dead-end businesses is not enough. In addition, it is a dangerous step. Latvian government has to combat risky deposits in general by making radical decisions to help ensure transparency and sustainable development of the country’s financial system,» says acting director of the organization Liene Gātere.

She informs that at a total amount of at least EUR 20 billion have been laundered using banks in Latvia over the course of the past twenty years. This amount is equal to 70% of Latvia’s GDP. In addition, Latvian banks regularly end up in the sights of international financial watchdogs.

According to the organization, investigation of violations and sorting of the financial sector was performed as a result of international pressure. Offshore service providers that have developed in close cooperation with Latvian banks are some of the main creators of anonymous dead-end businesses, attracting high-risk customers for banks over the years, Delna reports.

«Decision aimed at increasing measures to help combat money laundering schemes would be the best possible response from the government. It is also necessary to look at developments in a systemic way – deals with high-risk clients are unsustainable and do not bring any tangible benefits for Latvia’s development, economic growth or international reputation. According to data from Association of Latvian Commercial Banks, non-residents’ money formed 41.1% of all deposits in Latvian banks in Q2 2017. A large portion of this money is part of short-term deposits. Benefits are provided mostly to bank owners, no thought is put into the impact such activities could have on the country’s reputation,» as noted in Delna’s report.

The organization adds that the flow of money with unclear origin creates fertile soil for threats to the country’s and international security. «Kleptocratic countries use money laundering to concentrate financial resources in democratic countries in order to use this money to enhance their rule when it comes to so-called information wars. Considering geopolitical reality and external threats, Latvia’s domestic policy should put special attention on these matters.»

Delna’s report mentions that Finance and Capital Market Commission has been talking of risks associated with non-resident businesses for years. Unfortunately, money laundering activities continued in spite of efforts to combat them. Reputation can be changed by securing transparency and openness of the financial system and business environment.


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