Banks, Financial Services, Latvia

The recommendations are drafted to establish an internal control system for the prevention of money laundering and combating terrorism and proliferation financing (AML/CTPF), and sanctions risk management, as well as customer due diligence. The existing recommendations provide an explanation and examples in areas such as risk assessment, development of the internal control system and customer due diligence.

FCMC Chairwoman Santa Purgaile emphasizes, “We have developed a practical guide for financial institutions to improve their internal processes in the prevention of financial crime and performing customer due diligence. Through these recommendations we wish to facilitate the implementation of a risk-assessment approach, which is one of our priorities. This means that, for example, lower-risk customers are undergoing less extensive due diligence, while high-risk customers are subject to more comprehensive and in-depth examination.”

S. Purgaile points out that the risk-based approach enables an institution to identify, assess and understand ML/TPF risks and apply appropriate risk management measures to effectively mitigate risks. The extensive work on recommendations has been carried out in conjunction with the industry, based on practical application, establishing a dialogue, promoting a common understanding and mutual trust between all shareholders.

Sanita Bajāre, Chief Executive Officer at Finance Latvia Association,“Combating financial crimes is important both at national and global level. Latvia has significantly improved its system for preventing financial crime and money laundering. But the work on the development of the system is ongoing. The guide approved by the FCMC to strengthen the risk-based approach is a step towards more flexible, efficient and proportionate cooperation between the bank and its clients, as well as between the supervisor and a bank. The work done jointly may potentially result in the simplification of money laundering procedures and the reduction of administrative burdens for clients, helping to find an appropriate approach to each client’s risk level, as well as the possibility for banks to regularly strengthen and improve their understanding of the nature of the risk-based approach and application in practice.”

The successful dialogue initiated in the drafting of recommendations will continue regularly updating and supplementing the guide. This is a way in which the FCMC may provide the industry with a comprehensive feedback on the conclusions and findings of inspections, as well as the possibility for the FCMC and financial institutions to regularly maintain a dialogue on the implementation of the risk-based approach in practice. Thus the resources would be devoted to the main objective of joint actions against the use of services supporting ML/TPF.

The recommendations are available on the FCMC website and are intended for employees of financial sector institutions dealing with the issues related to internal control systems, customer due diligence and the prevention of ML/TPF.