Latvia’s Success Story in Compliance Risk Assessment

Riga, Latvia - In a remarkable turnaround, Latvia has transformed its financial crime prevention system, moving from being on the brink of being listed as a “grey country” by the Financial Action Task Force (FATF) to becoming an international model for effective compliance risk assessment.

Strong AML Regulation and Commitment to International Standards

According to Sanita Bajāre, Chairwoman of the Board at Finance Latvia Association, Latvia’s success is attributed to its strong AML regulation and commitment to complying with the highest international standards. “We worked closely with public administration to develop necessary regulatory amendments, performed risk assessments, and developed tools for competent management of risks,” she explained.

Effective Internal Control Systems

The country has also implemented effective internal control systems, utilizing automation and wide use of data sources, such as:

Adverse media assessment
Interconnection with state registers for customer due diligence. This approach has been praised by the international community, with Latvia’s public-private partnership model being seen as a best practice.

Notable Experience in Sanctions Implementation

Latvia’s experience in sanctions implementation has also been notable, with the country refusing unreasonable cash flows from Russia following its war in Ukraine. As a result:

Foreign deposits have decreased significantly
Outgoing transactions of foreign customers have dropped by 60% compared to 2017 The country’s banks were able to react quickly to sanctions, making well-thought-out decisions and cooperating smoothly with state institutions and customers.

Tone from the top has been crucial in ensuring compliance with the highest AML/CTF standards, with regulators emphasizing the importance of:

Data sharing
Public-private cooperation As a result, Latvia has become an opinion leader, developing new and effective tools that have inspired other countries to adopt similar approaches.

Challenges Remain

Despite progress, Latvian financial sector officials acknowledge that challenges remain, particularly in areas such as:

Trade
Cross-border transportation However, they emphasize the importance of continued dialogue and information sharing with businesses to prevent circumvention of sanctions.

As Latvia looks to maintain its reputation and continue to grow, it will be essential to focus on social and governance objectives, recognizing that addressing:

Corruption
Kleptocracy
Shadow economy is crucial for maintaining financial system stability and individual security.

Future Plans

In the coming years, Latvian banking sector will strive to provide inclusive financial services while continuing to develop and refine its compliance risk assessment systems. The country’s success story will be shared at an international conference on April 27, “From grey to green: Latvia’s success story,” bringing together financial experts from around the world.