Money laundering recedes, corruption and smuggling still major problems

The latest data suggest that money laundering risks in Latvia have declined somewhat, yet corruption and contraband remain vital problems that need to be addressed urgently, according to a survey by the Latvian Chamber of Commerce and Industry on the unobserved economy, corruption in the public sector and money laundering.

Arnis Sauka, Associate Professor at the Stockholm School of Economics in Riga, said that prevention of money laundering was still important in a Latvian context as well as representing a great challenge to almost all countries.

However, the situation in Latvia has significantly improved, as shown by the latest Business Against Shadow Economy Index 2017. The progress is largely due to Latvia's preparations for accession to the Organization for Economic Cooperation and Development (OECD) and implementation of the recommendations by other international organizations, Sauka said.

The Shadow Economy Index produced annually by the Latvian Chamber of Commerce and Industry in cooperation with the Stockholm School of Economics in Riga and other surveys indicate that the shadow economy in Latvia is shrinking by one percent on average with every year and currently represents around 20-23 percent of GDP.

The survey presented today suggests that corruption in the public sector is a major problem in Latvia, although Sauka said that the studies on the subject were based mainly on the corruption perception by people or groups of people, such as business representatives, which might have been influenced by low trust in public authorities in Latvia.

The survey also found that Latvia was still having trouble fighting illegal alcohol and cigarettes. The problem is that those goods are much cheaper in neighboring Belarus and Russia.

However, serious efforts have been made in Latvia to fight contraband, and, compared to other countries in the region, drug trafficking is not a huge problem in Latvia, Sauka said.

Janis Endzins, the board chairman of the Latvian Chamber of Commerce and Industry, said that Latvia had made good progress in fighting the shadow economy but must keep up the efforts, focusing on curbing the contraband as it makes up a large share of the shadow economy. The officials should also make all effort to increase people's trust in the public sector, reducing the negative public attitude and the risks of corruption.

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