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Report: Latvia preps law banning shell companies in money laundering crackdown


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Report: Latvia preps law banning shell companies in money laundering crackdown

Latvia decided to implement legislation banning shell companies in a move to combat money laundering, Reuters reported March 21, citing Prime Minister Maris Kucinskis.

If the legislation is passed at the beginning of April as planned by the Latvian government, it could be implemented in May, the newswire cited the official as saying.

Finance Minister Dana Reizniece-Ozola said banks will be given a very short period of time after the legislation is introduced to end dealings with shell companies, and Kucinskis suggested the transition period could last six months.

Clients that will not withdraw their deposits during the transition period will be required to get regulatory approval to access their funds after the deadline has elapsed, according to Peters Putnins, the head of the Latvian Financial and Capital Market Commission, which will be involved in the process.

Latvia has been under pressure from Western countries to step up the fight against money-laundering practices after U.S. authorities accused ABLV Bank AS, which is now undergoing a voluntary liquidation procedure, of involvement in such transactions.

The country has over 10 banks holding mainly nonresident deposits. The funds often come from customers in Russia and former Soviet states who frequently use shell companies, the newswire reported, adding that there are over 26,000 such companies operating in the country, according to the Financial and Capital Market Commission.

Latvia launched just 85 money-laundering investigations in 2017 despite banks reporting 17,900 suspect transactions, Reuters noted, adding that the figures illustrate the scale of the challenge that the country is facing.