Financial Crime World

Latvia Tightens its Grip on Anti-Money Laundering: A Guide for Businesses

Overview

As the fintech sector continues to thrive in Latvia, attracting over 100 fintech companies, including Mintos, Creamfinance, Twino, Bitfury, and Crasula, the country has strengthened its anti-money laundering (AML) regulations. In line with FATF Recommendations and EU AML Directives, Latvia’s AML laws now require businesses to implement robust measures to prevent money laundering and terrorism financing.

Who is Affected?

The Latvian AML regulations apply to a wide range of businesses, including:

  • Credit institutions
  • Financial institutions
  • Insurance service providers
  • Investment firms
  • Payment institutions
  • E-money institutions
  • Virtual Assets Service Providers (VASPs)
  • Branches of financial and credit institutions from other member states of the EEA or third countries

Regulatory Oversight

The Financial and Capital Market Commission (FCMC) and the Financial Intelligence Unit (FIU) are the two main authorities regulating the AML sector in Latvia. The FCMC supervises the financial market, issues regulations, while the FIU collects and analyzes financial data, reports suspicious transactions, and cooperates with law enforcement to investigate cases of money laundering.

AML Obligations for Businesses

To comply with Latvian AML laws, businesses must:

  • Implement AML policies and procedures
  • Conduct Customer Due Diligence (CDD), including Enhanced Due Diligence (EDD) where necessary
  • Comply with requirements for customer identification and verification as part of CDD
  • Conduct ongoing monitoring of customers and transactions as part of CDD
  • Appoint a Money Laundering Reporting Officer (MLRO)
  • Report to the Financial Intelligence Unit (FIU)
  • Retain data about customers and transactions

Customer Due Diligence

CDD is a crucial aspect of AML compliance in Latvia. Businesses must conduct standard CDD when:

  • Starting business relationships with customers
  • Occasional transactions exceeding €15,000 in value occur
  • Transfers of funds exceeding €1,000 take place
  • Virtual currency is used
  • Suspicion of money laundering arises
  • Previously obtained CDD information is deemed not true

Enhanced Due Diligence

In situations with a high risk of money laundering, businesses must apply EDD. These cases include:

  • Correspondent relationships with credit/financial institutions
  • Business relationships and transactions with Politically Exposed Persons (PEPs) or family members of PEPs
  • Customers from high-risk third countries

KYC Requirements

As part of their Know Your Customer (KYC) obligations, businesses must identify and verify the identity of customers, as well as their beneficial owners. To identify natural persons, businesses must obtain:

  • Name and surname
  • Personal identity number (for Latvian residents)
  • Date of birth, photograph, identification document details, and country of issue (for non-residents)

To identify legal entities, businesses must present documents attesting to the entity’s name, legal form, incorporation or registration, registered address, and actual address.

Identification of Beneficial Owners

A beneficial owner is a person who directly or indirectly owns more than 25% of a company’s capital/voting rights or exercises ultimate control over it. To identify beneficial owners, businesses must obtain their identity information from the Enterprise Register or other means, such as customer self-declaration, EU Beneficial ownership registers interconnection system (BORIS), or admitting someone from the client’s senior management.

Ongoing Monitoring

Businesses in Latvia must implement ongoing verification of the accuracy of obtained KYC data to ensure correct risk profiles and efficient monitoring processes.

Sanctions

Failure to comply with AML laws may result in fines of up to €5,000,000 or 10% of total annual turnover.