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Monday 18.06.2018 | Name days: Madis, Alberts

National Alliance and banks lobby the legalization of trusts to hide properties

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEach formation of a new government has some group of politicians lobby interests of different groups behind the scenes in order to benefit from upcoming changes in politics. The latest government formation process in Latvia was no exception. During government declaration talks, the National Alliance tried including a specific point there regarding the necessity for Latvia to have a law to regulate activities of trust funds.

Trust – is a financial arrangement when wealthy people entrust their properties and money to be managed by someone else because they are unable to do this themselves for one reason or another. There are all kinds of reasons people turn to trusts – inability to manage owned properties or attempts to hide them from voters and tax inspectors, as reported by Nekā personīga (Nothing personal) programme of TV3.

Finance and Justice ministries believe this idea would contradict the principles of transparency and openness that are requested to be established in Latvia by different international institutions.

Plans to legalize trust foundations in Latvia have been present since the ’90s. This initiative has been circulating from time to time in the Finance Ministry, banks have discussed it many times with the Finance and Capital Market Committee. The foundation of trusts is not prohibited in Latvia, but banks primarily want there to be a separate law, so that rules of the game are clear for all. When Straujuma’s government was compiled, the proposal to legalize trusts came up multiple times during declaration talks.

Co-Chairman of the National Alliance, Gaidis Bērziņš, actively lobbied this proposal. He claimed he only represents the interests of his party and has had no talks with banks in the past. He added that it is impossible to prevent the inflow of dirty money in the country if there are no laws to regulate these activities.

The Commercial Banks Association claims there have been no talks with politicians regarding the creation of trust institutions during the formation of a new government in Latvia. The association believes the decision to cross out this initiative is short-sighted.

Banks that service non-residents also support the initiative to legalize trusts in Latvia. AB.LV believes the creation of trusts is a golden opportunity for Latvia.

‘Trusts protect investors’ interests. Of course, the interests of investors include the preservation of secrecy about the locations of their valuable assets. This law would regulate civil relations and if there is some criminal process, the law would not interfere with the investigation. Law enforcement institutions have rights to request any information that could help with the investigation,’ – explains AB.LV Chairman Vadim Reinfeld.

Even after countless attempts to lobby this initiative, Gaidis Bērziņš failed to get this point in the declaration of the new government in Latvia. Nevertheless, banks promise to continue to pressure the government. The Finance Minister currently has the Financial Sector’s development plan for 2014-2016 under his wing. If banks manage to lobby their initiative in this document, politicians will be obligated to take it into account.

‘It is a tax optimization scheme that is present in many places around the world. This is why Finance Ministry does not support such proposals,’ – said Finance Ministry’s State Secretary Sanita Bajāre.

The most popular trust deal in Latvia is linked to Andris Šķēle. In order to avoid a conflict of interests while remaining in the post of Prime Minister and remain in charge of Ave Lat Group, Šķēle handed over the rights to manage and maintain this joint stock company to an offshore company, receiving promissory notes worth USD 29 million in exchange. At the time, Ave Lat owned Rīgas piena kombināts, Balticovo, Latvijas balzams, Rīgas alus and Laima.

Trusts are not the only innovative solution banks want in Latvia. It is also proposed to amend laws in order to allow companies to become Board members in other companies. Only private persons are allowed to take Board posts in companies. They are the ones who answer before the law for activities of their represented companies. Banks plan to create special companies to take over business management from entrepreneurs. If this initiative is approved, any company working in any part of the world will be able to become a Board member in Latvia’s companies. This includes those hidden in offshores. This will likely reduce business transparency in Latvia. Finance Ministry promises not to allow such a thing to happen.


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