RIGA - Prime Minister Aigars Kalvitis said last week that the government would soon consider several legislative amendments as part of its campaign to clean up the country's financial system from money laundering.
Other than amendments to laws on credit institutions and money laundering, the government will consider a law on declaring cash while crossing the border, Kalvitis said. Currently the country has no such law, which allows people to bring large sums of money into the country and deposit it into banks. Also, there could be several new provisions stipulating in which cases law enforcement authorities are allowed to obtain information about a bank's clients.
The prime minister also said that bank supervision would be stepped up and the work of law enforcement institutions improved. More funds for additional staff will be allocated, he stressed. "We don't want to lose the profitable banking sector," he said.
Kalvitis has made the fight against money laundering a Cabinet priority, and the government has already formed an anti-money laundering council headed by the prime minister himself. The group is designed to coordinate work in the law-enforcement division.
Latvia has 23 banks, including one foreign branch - by far the most in the Baltics - and also leads with its size of banking assets. According to the European Central Bank's Blue Book statistics for 2002 (the freshest available), Latvia leads the 10 new EU members with banking transactions per capita (242,000 euros).
But Kalvitis' initiative has many in the industry up in arms. Janis Brazovskis, deputy head of the Finance and Capital Market Commission, Latvia's banking watchdog, said the country could lose some of its nonresident deposits if it goes ahead with the amendments. Brazovskis did not rule out that some $1.5 billion could gradually flow out of nonresident deposits but stressed this would not affect the economy since it gains virtually nothing from such balance-sheet assets. Any outflow of deposit money would only affect bank shareholders, he said.
Teodors Tverijons, president of Latvia's Association of Commercial Banks, also said that nonresident deposits could decrease, but he noted that they could remain unchanged since many banks started implementing similar anti-money laundering measures six months ago. Indeed, Brazovskis said Kalvitis' proposed amendments are a version of banking requirements already in place.
Meanwhile, analysts are speculating the long-term repercussions of the government's crack-down. RosBusinessConsulting, a Moscow-based financial news service, has predicted that the number of banks in Latvia will decrease substantially as a result of the measures. Others have speculated that Kalvitis' anti-dirty money campaign is the initiative of People Party sponsor and former Prime Minister Andris Skele as a way of boosting market share for the country's large Scandinavian-owned banks, who are likely to benefit from any closure of smaller financial institutions.
