Latvia is enhancing its efforts to combat financial fraud and money laundering with two key initiatives to strengthen the resilience of the financial sector. In cooperation with the Finance Latvia Association, Latvijas Banka has issued new guidelines for managing financial fraud risks. Simultaneously, the Financial Intelligence Unit of Latvia (FIU) focuses on the growing threat of money laundering linked to environmental crime. These developments clearly signal businesses in the financial and fintech sectors that robust anti-money laundering (AML) frameworks are no longer optional but a regulatory imperative.
The new Guidelines for the Supervision, Management, and Containment of Financial Fraud Risk introduced by Latvijas Banka and the Finance Latvia Association offer a unified, risk-based approach for credit institutions, payment institutions, electronic money institutions, and their branches operating in Latvia. These guidelines focus on enhancing financial institutions’ ability to identify, mitigate, and prevent financial fraud through more precise internal management practices and enhanced customer protection measures.
These guidelines promote a comprehensive approach to fraud risk management. The framework advocates strong internal controls, a structured process for handling customer complaints, and the effective suspension and rejection of payment orders when necessary. In addition, the guidelines emphasise the importance of robust information sharing between institutions to improve fraud detection and prevention.
As part of Latvia’s ongoing efforts to align its regulatory framework with international standards, the Guidelines are regularly updated, ensuring they stay relevant in light of evolving financial threats and practices. The practical application of these measures helps financial service providers ensure that their processes are transparent and efficient, ultimately strengthening their ability to protect both customers and the broader financial ecosystem.
Key recommendations within the Guidelines include:
- Establishing a comprehensive fraud risk management framework with strong internal controls.
- Implementing effective complaint-handling mechanisms.
- Enhancing information-sharing practices to improve fraud detection and prevention.
- Continuously monitoring fraud risks to strengthen resilience in the financial sector.
These recommendations signal an urgent call for fintech and financial institutions to reassess and improve their current systems in accordance with these evolving standards.
Parallel to these developments, the Financial Intelligence Unit of Latvia (FIU) is also intensifying its focus on money laundering connected to environmental crimes. Environmental crime is one of the most financially lucrative illegal activities, generating over €250 billion annually. As outlined in Latvia’s National Risk Assessment on Money Laundering, Terrorism, and Proliferation Financing, the risk of money laundering tied to environmental offences is rising. In response, FIU Latvia, under the European Economic Area (EEA) grants initiative, is bolstering its capabilities to detect illicit financial flows linked to environmental crimes.
Key recommendations emerging from this focus on environmental crime include:
- Strengthening due diligence and transaction monitoring to detect financial flows linked to environmental crime.
- Integrating environmental crime typologies into AML frameworks and risk assessments.
- Providing specialised training for compliance teams on detecting and reporting transactions associated with environmental crime.
- Adopting international best practices and technological tools to improve the identification of illicit financial flows connected to environmental violations.
These evolving regulatory measures present challenges and opportunities for businesses in the financial sector. As the scope of money laundering risks expands beyond traditional financial crimes, fintech, payment service providers, and other financial institutions need to enhance their AML frameworks and adapt to these growing threats.
At ECOVIS ProventusLaw, we understand the importance of staying ahead in an increasingly complex regulatory environment. Our comprehensive AML services are designed to help businesses navigate these regulatory changes and build resilient compliance systems.
We offer a range of services, including:
- Internal Policies, Procedures, and Controls: We assist in drafting and implementing clear internal policies and procedures tailored to your business needs, ensuring your organisation fully complies with local and international standards.
- AML Training: From introductory to advanced training, we provide specialised AML training programs for your employees, ensuring they have the necessary knowledge to identify and report suspicious activities.
- Independent AML Audits: Our independent audits evaluate the effectiveness of your current AML processes, helping you identify any areas of non-compliance and implement corrective measures before regulators step in.
- AML Risk Assessments: We conduct comprehensive risk assessments to help you understand the money laundering and terrorist financing risks your organisation faces. These assessments provide actionable insights to strengthen your risk management strategies.
As Latvia continues to refine its regulatory landscape, financial sector businesses must ensure that their AML programs are robust and effective. Partnering with experts who understand the regulatory intricacies and emerging threats – will ensure your organisation remains compliant and resilient.
ECOVIS ProventusLaw is ready to guide you through changes mentioned above, offering expert AML support tailored to your needs. Contact us today to ensure your business is well-prepared for the future.
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