"To manage the situation in an effective manner, a clear and unambiguous prohibition on cooperating with shell companies must be put into law. Other measures that would put a complete end to servicing high-risk non-resident clients in Latvian banks are under the responsibility of the Financial and Capital Market Commission, " ALCB said in a statement.
According to the ALCB's estimates, 90% of Latvian clients are serviced by the four biggest banks in Latvia (Swedbank, SEB, Luminor, Citadele Bank), and so changes in what constitutes an acceptable business model would affect "only a fraction of the banking sector", even though ten banks in total would be affected.
"The ALCB expects that the institutions responsible for supervising the banking sector will act decisively to address the identified shortcomings and avoid any further negative reports from the US Treasury’s Financial Crimes Enforcement Network or from other international partners, statements which could completely destroy Latvia’s international reputation," the ALCB warned.
In the event that a Moneyval report on Latvia, due to be published this autumn, proves to be unfavourable, it would bring "immense challenges for banks servicing Latvian companies and residents," it added, saying the Latvian government "must do everything necessary to demonstrate clear action and commitment to fighting financial crime and to not allow Latvia’s banking system be used for unlawful activities which go against international practice and rights."
As previously reported by LSM, most - though not all - of Latvia's remaining banks are members of the ALCB.
You can read about the banks that constitute the higher-risk, non-resident sector in our special overview HERE.
