Banks, EU – Baltic States, Financial Services, Latvia

Kazaks said that a lot has been done over the past year to prevent it but that the risks still remain high.

The consequences of Latvia's inclusion in the "grey list" could be very unpleasant, for example, lending growth which has remained weak since the last crisis would not resume during the next economic cycle either.

"In this scenario, the economic development gap between Latvia on one side and Estonia and Lithuania on the other would only continue widen," Kazaks warned.

The member of the Bank of Latvia Council believes that until February 2020, Latvia has to keep actively explaining international organizations all the measures that have already been taken in Latvia to improve the situation.

"If we are included in the grey list, Latvia and its institutions have to have a clear policy in place - how to talk to investors, the financial sector and people," Kazaks said. 

The Bank of Latvia's task is to provide assistance and consulting to help alleviate the possible negative impact. In Kazaks' words, preparations are already under way at the central bank to get ready for various scenarios. 

As reported, Moneyval has placed Latvia in enhanced follow-up procedure because of the number of Low and Moderate ratings awarded for Effectiveness. Two areas were considered to have low levels of effectiveness - relevant beneficial ownership information and preventing proliferation financing.

Moneyval plenary session in Strassbourg this week will review Latvia's progress report on implementation of the recommendations. The official conclusion of experts could be released on December 6.

Financial Intelligence Unit's head Ilze Znotina said in November that Latvia has achieved substantial and irreversible changes in combating financial and economic crimes.