Major amendments have been prepared to combat more effectively money laundering
The Ministry of Finance has compiled proposals by all the institutions involved and, in cooperation with the Ministry of Justice and the Enterprise Register, will put forward amendments to the Law on the Prevention of Money Laundering and Terrorism Financing. The amendments are aimed at making anti-money laundering system more effective and preventing false reporting on the true beneficiaries.
The Minister for Justice Jānis Bordāns says, “The amendments proposed by the Ministry of Justice and the Enterprise Register are a continuation of the reforms already launched in the financial sector. They are an important tool for a more effective fight against money laundering. The amendments will bestow more powers to the Enterprise Register when evaluating the information and will facilitate prompt provision of information to the law enforcement authorities regarding false information provided by companies to the Enterprise Register. These amendments will also allow for the conclusion of the process of identifying the true beneficiaries of 1740 high-risk limited liability companies, which have failed to fulfil statutory obligations."
Chief State Notary Guna Paidere says, "The current situation regarding identification of true beneficiaries is not encouraging – entrepreneurs have been inactive to report to the Enterprise Register about the true beneficiaries in companies. Amendments to laws and regulations would be an additional control tool for the provision of true information and understanding the consequences of providing false information to the Enterprise Register."
The amendments to the Law on the Prevention of Money Laundering and Terrorism Financing provide that legal entities, such as sworn lawyers, outsourcing accountants, credit institutions, and others will have to report to the Enterprise Register on cases where, in the course of the investigation, it has been concluded that information on the true beneficiary of the client does not correspond to that registered in the Enterprise Register.
Accordingly, the Enterprise Register will be obliged to inform law enforcement authorities about the provision of false information regarding the true beneficiaries, while also alerting other legal entities about possible inaccuracy of information.
The amendments also impose a new obligation on foreign companies and organisations, which register their branches or agencies in Latvia, to disclose the true beneficiaries. As soon as the requirement of the draft law comes into force, foreign companies will have a six-month period to inform the Enterprise Register of their true beneficiaries. If this is not done, the branch or representation will be excluded from the register. In addition, it is intended to grant the Enterprise Register the right to request a documentary justification for the control exercised by the legal person, as well as documents confirming the identity of the true beneficiary.
The Enterprise Register will thereby be more effective when assessing the veracity and relevance of the information submitted, as well as the risks with respect to the true beneficiaries of the legal entities.
In view of the fact that there are companies which, under the current regulation, have declared by default their true beneficiaries in order to organize records in the database, it is envisaged that the Enterprise Register will register true beneficiaries in these cases on the basis of the law, without taking a separate decision.
The amendments also provide for an extension of the scope of entities with insolvency administrators who will be obliged to verify the legality of the debtor’s property in the process of alienation and to ensure that criminal proceeds are not legalized through insolvency proceedings. This process will be supervised by the Association of the Certified Administrators of Insolvency Proceedings of Latvia.
The Ministry of Finance has submitted the above amendments to the Cabinet of Ministers for consideration at the closed sitting of the government.