Banks, Financial Services, Latvia, Legislation, Markets and Companies

57 MPs voted for the bill, 17 voted against, while four abstained.

The Cabinet of Ministers on April 10 upheld the draft amendments to the Law on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) aimed at strengthening the Latvian finance system by reducing the number of risky transactions with high-risk customers that meet the definition of a shell company. The bill is also intended to increase the exchange of information between the financial institutions and the law enforcement agencies.

The bill foresees the banning of Latvian financial institutions from cooperation with the entities that show the signs of being a shell company. Under the law, the shell company is defined as an entity that fits one or several of the following three criteria. Firstly, there is no actual economic activity and no documentary proof to the contrary. Secondly, the entity is registered in a jurisdiction where companies are not required to submit to the authorities their financial statements. Thirdly, the entity has no place of business in its country of domicile.

In opinion of the Finance Ministry, the first two criteria are decisive in determining the AML/CFT risks related to shell companies. Therefore the ministry proposes that the ban to do business with shell companies would apply to the entities that meet both those of criteria at once.