Latvia

1. Does Latvia have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Money laundering: Yes. According to Section 195 of Criminal Law of the Republic of Latvia, money laundering is a serious crime but may be classified as very serious crime if committed on a large scale or by an organised group.

Terrorism financing: Yes. Pursuant to Section 792 of Criminal Law of the Republic of Latvia, terrorism financing is very serious crime.

2. To whom does the legislation apply?

It applies to any natural person aged 14 or above who has committed the criminal offence in the territory of Latvia (Paragraph 1 of Section 2 and Section 11 of Criminal Law of the Republic of Latvia).

In cases where the offence has occurred within the territory of Latvia and has been committed by a foreign diplomatic representative or another natural person who, under the laws in force or international agreements binding upon the Republic of Latvia, is not subject to the jurisdiction of the Republic of Latvia, the issue of whether the person is held to be criminally liable shall be decided by diplomatic procedures or under a mutual agreement between the relevant countries (Paragraph 2 of Section 2 of Criminal Law of the Republic of Latvia).

Where a natural person has committed a criminal offence acting in the interests of a legal person governed by private law, for the benefit of the person or as a result of insufficient supervision or control, the legal person may be subject to penalties (Section 12 of Criminal Law of the Republic of Latvia).

3. What does the legislation prohibit?

According to Section 195 of Criminal Law of the Republic of Latvia, it is prohibited to launder criminally acquired financial resources or other property.

Pursuant to Paragraph 1 of Section 4 of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing of the Republic of Latvia (AML Law) and Paragraph 3 of Section 7011 of Criminal Law of the Republic of Latvia, funds or property shall be considered as the proceeds of crime:

• if they have come into the ownership or possession of a person as a direct or indirect result of a criminal offence;
• if the value of the property is not proportionate to the legitimate income of the person, the person does not prove that the property is acquired in a legitimate way and the property belongs to a person:

1. who has committed a crime which, in its nature, is focused on the gaining of property or other kind of benefit regardless of whether any property or other kind of benefit has been gained as a result of the crime;
2. who is a member of an organised group;
3. who has committed a crime related to terrorism.

• if the value of the property which is at the disposal of such person who maintains permanent family, economic or other kind of property relationships with the person referred to above can also be recognised as a criminally acquired property, is not proportionate to the legitimate income of the person and the person does not prove that the property is acquired in a legitimate way.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

According to the Paragraph 1 of Section 5 of AML Law the following actions are money laundering:

• the conversion of proceeds of crime into other valuables, change of their location or ownership while being aware that these funds are the proceeds of crime, and if such actions have been carried out for the purpose of concealing or disguising the illicit origin of funds or assisting another person who is involved in committing a criminal offence in the evasion of legal liability;
• the concealment or disguise of the true nature, origin, location, disposition, movement, ownership of the proceeds of crime, while being aware that these funds are the proceeds of crime;
• the acquisition, possession, use or disposal of the proceeds of crime of another person while being aware that these funds are the proceeds of crime.

Pursuant to Paragraph 21 of Section 5 of AML Law, money laundering shall be recognised as such regardless of whether the exact criminal offence has been identified from which the proceeds have originated.

5. What level of intent or knowledge is required to establish a violation?

According to Paragraph 11 of Section 5 of AML Law, a violation may be established if the actions of money laundering are deliberate.

6. What are the potential penalties for infringing the legislation?

Money laundering: The applicable punishment for money laundering is deprivation of liberty for a period of up to five years or temporary deprivation of liberty, or community service, or a fine, with or without the confiscation of property. Where money laundering is committed on a large scale (not less than 25 000 EUR), or by an organised group, the offence is classified as an especially major crime with the applicable punishment – deprivation of liberty for a period of up to 12 years, with or without confiscation of property and with or without probationary supervision for a period up to three years (Paragraph 3 of Section 195 of Criminal Law of the Republic of Latvia).

Terrorism financing: The applicable punishment for terrorism financing is life imprisonment or deprivation of liberty for a period of up to 20 years, with or without confiscation of property and with or without probationary supervision for a period of up to three years.

7. Does the legislation have extra-territorial reach?

Yes.

Latvian citizens: Pursuant to Paragraph 1 of Section 4 of Criminal Law of the Republic of Latvia, Latvian citizens, non-citizens, and foreigners who have a permanent residence permit in the Republic of Latvia, shall be held liable, in accordance with this Law, in the territory of Latvia for an offence committed in the territory of another state or outside the territory of any state irrespective of whether it has been recognised as criminal and punishable in the territory of commitment.

Legal entities: According to Paragraph 11 of Section 4 of Criminal Law of the Republic of Latvia. For an offence committed by a natural person acting in the interests of a legal person registered in the Republic of Latvia, for the benefit of the person or as a result of insufficient supervision or control thereof in the territory of another state or outside the territory of any state (irrespective of whether it has been recognised as criminal and punishable in the territory where committed) the legal person may be subject to penalties.

Foreign citizens: Pursuant to Paragraphs 3 and 4 of Section 4 of the Criminal Law of the Republic of Latvia, foreigners who do not have permanent residence permits in the Republic of Latvia and who have committed:

• serious or very serious crimes in the territory of another state which have been directed against the Republic of Latvia or against the interests of its inhabitants, shall be held criminally liable in accordance with this Law irrespective of the laws of the state in which the crime has been committed, if they have not been held criminally liable or committed to stand trial in accordance with the laws of the state where the crime was committed;
• a criminal offence in the territory of another state or outside the territory of any state, in the cases provided for in international agreements binding upon the Republic of Latvia, irrespective of the laws of the state in which the offence has been committed, shall be held liable in accordance with this Law, if they have not been held criminally liable for such offence or committed to stand trial in the territory of another state.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Yes.

According to Section 3 of the AML Law, the following persons performing an economic or professional activity have additional obligations under the rules and regulations of the AML Law and those related to it:

• credit institutions;
• financial institutions;
• outsourced accountants, sworn auditors, commercial companies of sworn auditors, and tax advisors, as well as any other person undertaking to provide assistance in tax issues (for example, consultations or financial assistance) or acting as an intermediary in the provision of such assistance regardless of the frequency of its provision and existence of remuneration;
• sworn notaries, sworn advocates, other independent providers of legal services when they, acting on behalf and for their customer, assist in the planning or execution of transactions, participate therein or carry out other professional activities related to the transactions for their customer concerning the following:
• buying and selling of immovable property, shares of a commercial company capital;
• managing of the customer’s money, financial instruments and other funds;
• opening or managing of all kinds of accounts in credit institutions or financial institutions;
• establishment, management or provision of operation of legal persons or legal arrangements, as well as in relation to the making of contributions necessary for the establishment, operation or management of a legal person or a legal arrangement;
• providers of services related to the establishment and provision of operation of a legal arrangement or legal person;
• intermediaries of immovable property transactions;
• organisers of lotteries and gambling;
• persons providing cash collection services;
• other legal or natural persons trading in means of transport, cultural monuments, precious metals, precious stones, articles thereof or trading in other goods, and also acting as intermediaries in the abovementioned transactions or engaged in provision of services of other type, if payment is carried out in cash or cash for this transaction is paid in an account of the seller in a credit institution in the amount of EUR 10 000 or more, or in a currency the amount of which according to the exchange rate to be used in accounting in the beginning of the day of the transaction is equivalent to or exceeds EUR 10 000 regardless of whether this transaction is carried out in a single operation or in several mutually linked operations;
• debt recovery service providers;
• virtual currency service providers;
• persons operating in handling of art and antique articles by importing them into or exporting them from the Republic of Latvia, storing or trading in them, including such persons who carry out the actions provided for in this Clause in antique shops, auction houses, or ports, if the total amount of the transaction or several seemingly linked transactions is EUR 10 000 or more;
• administrators of insolvency proceedings (Subjects of AML Law).

Subjects of AML Law have not only reporting obligation on suspicious transactions and sanctions violations, but also have to:

• assess own and client’s AML risks;
• create and update Internal Control System;
• determine the AML responsible person;
• make due diligence procedures of the Clients in certain occasions, including Clients regular monitoring and maintenance of the documentation;
• train staff;
• comply with FIU requirements;
• register in Financial Intelligence Data Receipt and Analysis System of the FIU of Latvia etc.

9. What are the potential penalties for failing to comply with these obligations?

The following sanctions may be imposed for the violation of the laws and regulations in the field of the prevention of money laundering and terrorism and proliferation financing, including in relation to the customer due diligence, monitoring of the business relationship and transactions, reporting of suspicious transactions, provision of information to the supervisory and control authority or the Financial Intelligence Unit of Latvia, refraining from execution of a transaction, freezing of funds, internal control system, storage and destruction of information, as well as for the violation of Regulation No 2015/847:

Generally:

• to express a public announcement by indicating the person liable for the violation and the nature of the violation;
• issue a warning;
• to impose a fine on a person (natural or legal) liable for the violation in the amount of twice the profit obtained as a result of the violation (if it can be calculated) or another fine up to EUR 1 000 000;
• to suspend or discontinue the activity (including to suspend or cancel the licence (certificate) or to cancel the entry in the relevant register, to suspend economic activity, to apply a prohibition on changes in the registration in the commercial register for reorganisation of a commercial company and change of shareholders) and to give orders to credit institutions or payment service providers regarding partial or complete suspension of settlement operations;
• to set a temporary prohibition on a person liable for the violation to fulfil the obligations specified for him or her;
• to impose an obligation to perform certain action or refrain therefrom;
• to impose an obligation to dismiss the person liable for the violation from the position held.

On credit institutions and financial institutions:

• to impose a fine on a legal person in the amount of up to 10 per cent of the total annual turnover according to the latest approved financial statement, drafted, approved and audited, if necessary, in accordance with the laws and regulations in the field of preparation of annual statements binding to the credit institution or financial institution. If 10 per cent of the total annual turnover, available in accordance with that which is laid down in the first sentence of this Clause, is less than EUR 5 000 000, the supervisory and control authority is entitled to impose a fine in the amount of up to EUR 5 000 000. If the credit institution or financial institution is a parent undertaking or a subsidiary undertaking of a parent undertaking, the corresponding total annual turnover shall be the total annual turnover or the income of the corresponding type in accordance with the relevant laws and regulations and the latest available consolidated statements which have been approved by the key management body of the parent undertaking;
• to impose a fine of up to EUR 5 000 000 on the official, employee or a person who, at the time of committing the violation, has been liable for the performance of a specific action upon assignment or in the interests of the credit institution or financial institution.

10. Who are the relevant enforcement authorities in Latvia and what are their contact details?