Banks, Financial Services, Latvia

The FCMC head indicated that the money that used to flow through Latvian banks without benefitting the Latvian economy in any way, posed huge risks. The regulator therefore ordered the banks to get rid of this money.

"The objective was to eliminate this money," Purgaile said, stressing that this task has been fulfilled and the Latvian financial sector is now practically free of this risky money.

Purgaile stressed that the FCMC continues to assess potential risks in some banks but did not name these banks. She said that several banks that used to serve mainly non-resident clients, are currently in the process of transforming their core business and will focus on serving domestic clients or at least clients from the euro area.

FCMC representatives have been meeting with each bank to discuss their future plans and make sure their operations are on the right track, Purgaile said. However, she avoided a direct answer when asked if there is enough room for all banks in the market.

As reported, the Financial Action Task Force (FATF) has decided not to put Latvia under increased monitoring, which means it will not be added to the so-called "grey list" of countries failing to properly combat money laundering and terrorist financing.

FATF decided on Latvia's inclusion or non-inclusion in the "grey list" at its plenary session, which took place in Paris in February 2020. FATF "greylists" countries showing strategic flaws in combating money laundering and the financing of terrorism.

FATF concluded at the plenary session that Latvia has developed a strong and resilient system for combating financial crimes and that the country therefore will not be put under increased monitoring, or on the so-called "grey list".

With this decision, Latvia has become the first member state under the supervision of the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) to successfully implement all 40 FATF recommendations. Moneyval is an associated member of FATF