Financial Crime World

Here is the article in markdown format:

Latvia Tightens Beneficial Ownership Disclosure Rules

In a move to strengthen anti-money laundering (AML) regulations, Latvia has amended its Commercial Law and AML Law, introducing new requirements for disclosing beneficial ownership (BO) information. The changes aim to enhance transparency and prevent money laundering in the country.

What is a Beneficial Owner?

According to the AML Law, a beneficial owner is a natural person who:

  • Owns more than 25% of the shares or voting rights in a legal entity through direct or indirect shareholding
  • Controls the entity directly or indirectly

These two conditions mean that even a person with less than 25% ownership but controlling influence will be considered a BO and must disclose relevant information.

BO Disclosure Obligation

The new regulation expands the subjects of disclosure obligation compared to the previous Commercial Law. The affected entities include:

  • Natural persons who believe they have become BOs, which requires them to notify the legal entity
  • Legal entities that must use their initiative to identify and determine their BOs if data filed about the BO raise cause for doubt or are missing

BO Identifying Information

A BO must submit the following information to the legal entity:

  • Name, surname
  • Identity code (if any) and date of birth
  • Number and date of issue of personal identification document, country, and institution that issued it
  • Country that issued their personal identification document, which corresponds to their nationality and country of residence

Exceptions to Disclosure Obligation

The law provides exceptions for certain situations where disclosure is not required. These include:

  • Public companies where control results only from the shareholder’s status
  • Companies with sole founders who are also BOs
  • Companies that have previously submitted BO information during performance of other obligations

Timeline and Consequences of Non-Compliance

Key dates for compliance include:

  • December 1, 2017: Legal entities’ obligation to disclose BO comes into force
  • February 1, 2018: Natural persons who are BOs or act on behalf of others must notify the legal entity
  • March 1, 2018 (not later than within 14 days from receiving information): Companies that have not disclosed BO under the Commercial Law regulation must file notification with the CR

Failure to comply with the disclosure obligation may result in penalties and sanctions. While the current AML Law does not specify penalties for non-compliance among all legal entities, it is expected that this will be addressed in future amendments. In the meantime, administrative violations codes can apply, ranging from warnings or fines of EUR 70 to EUR 100.

For companies, management boards may be held liable for losses caused by non-compliance with disclosure obligations unless they prove due diligence.

Conclusion

Sorainen advises clients and cooperation partners to draw attention to these new regulations. Additional information or assistance is available through Sorainen or a client’s own legal counsel.