Financial Sector Transformation
Latvia passes ambitious reforms to fight financial crime
On 13 June, Latvian parliament adopted a comprehensive legislative package, furthering the overhaul of financial sector regulation. Furthermore, Prime Minister Krišjānis Kariņš commended the Latvian Parliament’s decisive vote to pass landmark reforms to strengthen financial sector supervision into law.
“These ambitious reforms are a big step forward in our fight against money laundering, the financing of terrorism, and arms proliferation. These measures demonstrate our unbending political will to make further changes in the financial sector as quickly as possible, and to become a leader in transparency and governance in EU. I call on all EU Member States to strengthen our mutual cooperation in dealing with financial crime and to work more closely and effectively together in the future,” said Mr. Kariņš.
With these measures, Latvia will have implemented the EU’s 5th Anti-Money Laundering Directive six months ahead of the deadline for Member States. The government will complete the remaining measures in its overhaul of financial sector regulation by the end of 2019.
The reform package will strengthen the independence, governance, and democratic accountability of the governance structure of the Latvian financial and capital watchdog FCMC, as all Members of the FCMC board – including the chairman – will be appointed by the Latvian Parliament. These changes are in line with international standards and in compliance with the Basel Committee’s banking supervision principles, in that they further improve the transparency of the candidate selection process.
The measures will also enable Latvia to impose sanctions approved by the United Nations Security Council more rapidly. Latvian authorities will no longer have to wait for EU mechanisms to transpose sanctions.
The new set of measures take into account advisory directions from leading international bodies, including the European Central Bank, OECD and the Egmont Group; and demonstrate the Government’s determination to impose and maintain robust standards for the financial sector.
European Central Bank supports expansion of FCMC’s functions
According to the European Central Bank (ECB) on amendments to the Financial and Capital Market Commission (FCMC) law, the expansion of the functions of the FCMC will strengthen the institution's ability to oversee and monitor financial crimes.
The ECB notes that it understands that changes to the FCMC governance envisaged in the draft law will have no impact on the FCMC’s responsibilities to the ECB.
Legal framework will allow for the effective implementation of sanctions in Latvia
On 13 June, the Latvian Parliament (Saeima) approved amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia. These amendments will come into force on July 4, 2019.
The amendments create a legal framework for Latvia to effectively implement sanctions in Latvia, including the implementation of United Nations Security Council resolutions without delay, as Latvian authorities will no longer have to wait for the EU mechanisms to transpose sanctions.
To stabilize the business sector and the financial sector, new authorities have been added as “competent institutions” and will be tasked with supervising their subjects in relation to internal sanction control systems, and to control the effectiveness of these systems. These authorities include the Latvian Council of Sworn Advocates; the Latvian Council of Sworn Notaries; the Latvian Association of Sworn Auditors; the Lotteries and Gambling Supervisory Inspection; the National Cultural Heritage Board; and the Bank of Latvia.
Additionally, the Cabinet of Ministers will create a Sanctions Coordination Council for all competent authorities to share their knowledge, and to unify the implementation of sanctions regimes.