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FCMC: The Latvian Banking Sector Has Got Rid of Undesirable Shell Companies

  • 2018-08-04
  • FCMC

The Financial and Capital Market Commission (FCMC) has summarised data about the Latvian banking sector results regarding cleaning of the customer base from risky shell companies which match two of the defined shell companies features simultaneously. Already earlier, when reviewing the customer base, especially since the new 2018 regulation taking effect, the number of such companies in the customer base of Latvian banks had dynamically decreased, and within the set term (i.e. by 7 July 2018) the balance of deposits of these customers formed the proportion of 0.03% in the total amount of deposits (predominantly, this being the balance of blocked cash in the outgoing flow).

On 9 May 2018, amendments to the law “On the Prevention of Money Laundering and Terrorism Financing” took effect, which set the requirement for the financial sector market participants in Latvia to stop cooperation with companies within 60 days, which simultaneously match two of the shell entity features – they have no actual economic activity and economic value and there is no requirement in the country of their registration to prepare financial statements.

FCMC Chairman Pēters Putniņš commented the current situation: “Now we can safely say that this work has been fully performed on the part of our banks. The remaining 0.03% or EUR 4.5 mil. is the outgoing flow or frozen cash on blocked accounts, where checks of the origin of the respective cash is required.  We see that the work started in 2016 is continued, the proportion of the risky part of the banks’ customers is decreasing every day, as banks also refuse to work with such shell entities that are not prohibited but the activity of which may involve big risks.   We can conclude that with regards to all types of shell companies, not only their prohibited part, about EUR 1.5 billion flew from the Latvian banking sector in the first half of this year. Further cooperation is refused for over 9000 of all types of shell companies".

As of the end of July, the proportion of deposits of foreign residents, including from the EU, in Latvian banks was 21%. The geographical structure of the deposits shows that domestic deposits dominate in Latvia - 79%.