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Majority of shell companies serviced by Latvian banks are based in the UK

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe majority of clients of Latvian banks are shell companies registered in the United Kingdom, as reported by Finance and Capital Market Commission.

According to data from FCMC, 32% of shell companies serviced by Latvian banks are registered in the UK. 18.1% of shell companies are registered in British Virgin Islands, 7% – in Belize, 6.8% – in Cyprus, 6% – in Seychelles, 6.4% – in Hong Kong, 6% in Panama, and 17.2% in other countries.

At the same time, FCMC Communication Office manager Ieva Upleja mentions that aside from ABLV Bank, whose shareholders have decided to commence self-liquidation, and five foreign banks in Latvia had 17,107 shell companies among their clients in February 2018. FCMC had previously reported that the number reaches 26,081 with ABLV Bank.

«The banking sector’s self-cleaning process will actively continue even without new regulations, because it is in the banks’ own interest. The most important objective right now is avoiding risky clients and dirty money. Intense work is being performed in relation to shell companies. Every bank pays attention to their clients’ profiles and makes decisions in regards to continuing cooperation with them. This is why cannot focus solely on supervision of shell companies and their full prohibition, because it is one of the ways to reduce shady deals in Latvia’s banking sector,» says Upleja.

She adds that companies with limited liability registered in Latvia and their transaction may fall under the profile of risky clients, making them akin to shell companies. It is expected that certain corrections will be made to the portfolio of domestic clients.

On Wednesday, 21 March, Latvian Prime Minister Māris Kučinskis’ managed Finance Sector’s Development Council supported initiative on prohibiting shell companies.

Finance Minister Dana Reizniece-Ozola says that the goal behind prohibition of shell companies is making sure Latvia’s financial sector is stable, sustainable, secure and able to offer services that provide support for the national economy, not create risks. «We have agreed on a plan of actions. A total of 22 proposals submitted by the regulator, finance ministry, Association of Latvian Commercial Banks and non-government organizations, the main goal of which is reducing the proportion of risky clients in the country’s banking sector,» she said.

The minister is also confident that new measures will help sort out the financial sector.

At the same time, Pēters Putniņš, head of the Finance and Capital Market Committee, mentioned that banks have been ten days to come up with strategic plans on future operations, specifically how they intend to cover losses caused by rejection of shell companies. «We expect this process to be relatively rapid. Because of that, it is highly important for stability’s sake to give banks some time to think things over,» he said.

FCMC had previously reported that among clients of Latvian banks are 26,081 shell companies, including two based in Latvia. The proportion of shell companies in all Latvian banks is 36.57%. Their proportion in the foreign clients segment is 44.5%.

In total, Latvian banks have approximately 2.6 million clients.


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