Moneyval assessment is good basis for faster development of Latvia's financial sector - Bank of Latvia

RIGA - The latest assessment of Latvia released by the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) is a good basis for accelerated development of Latvia's financial sector, LETA was told at the Bank of Latvia.

The sixth assessment round report recognizes compliance in all areas of the Bank of Latvia's competence or gives the highest rating.

Kristine Cernaja-Mezmale, a Member of the Bank of Latvia Council, said that Latvia's good international reputation in the area of financial crime prevention is part of national security guarantees.

"As a country, we have received very good international recognition for the anti-money laundering system we have put in place. This means that we can leave the historical experience behind and focus on building a safe and developed financial sector," said Cernaja-Mezmale, stressing that Latvia can confidently take the next steps to accelerate the development of the financial sector, international cooperation through correspondent banking relationships, and attracting foreign investment.

The Moneyval report says that in the Bank of Latvia's areas of responsibility, the understanding of financial sector risks is data-driven and appropriate, the measures applied by the supervisory authorities are based on conclusions of a risk assessment, the Bank of Latvia has a clear understanding of the risks of financial institutions, and the effectiveness of supervision is high. Risks in the largest segment of the financial market - credit institutions - have significantly decreased. Compliance in all segments has been facilitated by an effective supervisory process, as well as by supervisory training and communication. This has been the Bank of Latvia's priority in recent years, as a common understanding of regulatory requirements is the basis for a risk-based approach in practice.

As the national supervisor of the financial sector since 2020, the Bank of Latvia, and formerly the Financial and Capital Market Commission (FCMC), has systematically revised the regulatory framework, substantially changed the approach to inspections, and carried out extensive educational work, and these efforts have yielded results. Survey data show that 85 percent of Latvian entrepreneurs do not face any problems in dealing with banks in Latvia, the central bank said.

Moneyval's recommendations recognize a reduction of risks in the credit institutions segment, but warn of increased risks in relatively new market segments, which require a stronger supervisory focus. This is the focus of the Bank of Latvia's supervisory work at the moment in accordance with supervisory priorities and the inspection plan.

The Bank of Latvia notes that with this assessment, Latvia has gained a solid basis for developing a financial sector that is safe, accessible, innovative, and closely integrated in Europe, and that is trusted by Latvia's strategic partners and investors.

The central bank also said that policymakers, supervisors, and the financial sector have succeeded in creating a system that works efficiently and is able to manage risks. The Bank of Latvia issues licenses to new market participants every year, for example, eight licenses were issued last year, including the first two licenses for crypto-asset service providers at the end of last year. This work is ongoing, as more companies are at various stages of licensing.

As reported, the Moneyval report on the results of Latvia's mutual evaluation was published on Thursday.

The Financial Intelligence Unit of Latvia (FIU Latvia) informed LETA that Latvia has received an international assessment confirming the country's effectiveness in fighting financial crime, thus strengthening the integrity of the financial sector and contributing to safety and security of international financial system. According to the FIU, the report highlights that Latvia achieved high or substantial levels of effectiveness in all Immediate Outcomes (IOs), except one. Overall, the findings recognize Latvia's significant progress and its long-term commitment to fighting money laundering, terrorist, and proliferation financing.

Moneyval is the Council of Europe's expert committee that assesses member states against the FATF standards.

FIU Latvia head Toms Platacis commented that this evaluation sends a strong signal that Latvia is now recognized as a reliable and effective partner in the global fight against financial crime and sanctions evasion.

Around five years ago, Moneyval placed Latvia under heightened supervision, and Latvia was faced with the risk of being included on a list of countries identified as having strategic anti-money laundering and anti-terrorist financing deficiencies, the so-called "grey list".

In order to avoid being placed on the "grey list", Latvia launched extensive reforms or an "overhaul" of its financial system, which, among other things, led to much stricter requirements for credit institutions' customers and had a negative impact on the availability of loans.