Financial Crime World

Here is the rewritten article in markdown format:

Latvia’s Fintech Boom: A Guide to Know Your Customer (KYC) Requirements

===========================================================

Latvia has emerged as a hub for fintech companies, hosting over 100 firms including Mintos, Creamfinance, Twino, Bitfury, and Crasula. The country’s business-friendly infrastructure, such as the Innovation Hub and regulatory sandbox, makes it an attractive location for startups. However, with great opportunity comes great responsibility, and Latvia has been strengthening its anti-money laundering (AML) regulations to ensure compliance.

Who is Affected?

A wide range of businesses operating in Latvia or seeking to enter the market are subject to AML regulations, including:

  • Credit institutions
  • Financial institutions
  • Insurance service providers
  • Investment firms
  • Payment institutions
  • E-money institutions
  • Virtual asset service providers
  • Branches of financial and credit institutions from other EU member states or third countries

Regulators

The Financial and Capital Market Commission (FCMC) and the Financial Intelligence Unit (FIU) are the two main authorities responsible for regulating AML in Latvia. The FCMC supervises the financial market and issues regulations, while the FIU collects and analyzes financial data and reports suspicious transactions to law enforcement.

AML Obligations

Under Latvian AML law, businesses must implement policies and procedures, conduct customer due diligence (CDD), identify and verify customers, report to the FIU, and retain data. The FCMC provides guidelines on the implementation of AML measures in its Recommendations No. 169.

Customer Due Diligence

CDD involves collecting and verifying information about customers during onboarding and throughout the business relationship. Businesses must conduct standard CDD when starting a new customer relationship or when occasional transactions exceed €15,000 in value. Enhanced due diligence (EDD) is required in situations with a high risk of money laundering, such as:

  • Correspondent relationships with credit institutions
  • Business relationships with politically exposed persons

KYC Requirements

As part of their Know Your Customer obligations, businesses must identify and verify the identity of customers, including beneficial owners. Identification requirements for natural persons include:

  • Name
  • Surname
  • Personal identity number
  • Date of birth
  • Photograph

For legal entities, businesses must obtain incorporation documents, verify the identity of authorized representatives, and identify beneficial owners.

Ongoing Monitoring

Businesses in Latvia must implement ongoing verification of obtained KYC data to ensure that client risk profiles are accurate and monitoring is efficient.

Sanctions

Failure to comply with AML obligations can result in fines of up to €5 million or 10 percent of total annual turnover.

Key Takeaway

Latvia’s AML regulations have significant implications for fiat and crypto businesses operating within and outside the country. Sumsub can help your company stay compliant with KYC/AML requirements in Latvia. Contact us today.