Latvia warns its clampdown is pushing hot money to Europe
25 May 2018

Latvia has warned the European Union to bolster fragmented money laundering controls as much of the cash now leaving the Baltic state to escape tighter scrutiny is going to other EU countries.

The warning was issued by the country’s prime minister and finance minister in interviews with Reuters, when both called for better coordination across Europe in battling financial crime.

In February the United States accused Latvia’s third biggest bank, ABLV, of money laundering and breaking sanctions on North Korea, prompting its closure and the Baltic state’s worst financial crisis in a decade.

The government is now introducing stricter rules to prevent money laundering, such as making it harder for banks to deal with opaque shell companies that are set up to move money rather than do genuine business.

Officials say this has hurt business done by more than a dozen Latvian banks which have promoted themselves as a gateway to Western markets for customers largely in Russia, but also in Ukraine and Moldova.

Dana Reizniece-Ozola, Latvia’s finance minister, said EU countries and authorities needed to share more information to tackle laundering and prevent a repeat of Latvia’s problems.

She noted the fall in deposits held by foreign customers in Latvia after the reforms, saying the cash wasn’t heading back to ex-Soviet republics in the Commonwealth of Independent States (CIS).

“You would expect that the money would be flowing to Russia or CIS countries,” she said. “This is not the case. The major share stays within the European Union. This is why all the countries … should be safeguarding their systems as well.”

Her concerns were echoed by Prime Minister Maris Kucinskis who also said such money leaving Latvia usually goes to European countries. “Those bank accounts are being transferred,” he told Reuters. “The exchange of information between all of these countries … is a top priority.”

– By John O’Donnell, Reuters, 24 May 2018.

Link to Reuters.

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