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Amendments made to the AML Law

2019-09-04

Amendments have been made to the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing, also known as the AML Law. The amendments are a part of Latvia’s attempts to comply with the legal acts of the European Union and to overcome the country’s weaknesses as stated in the Moneyval 2018 report. Taking into account the recent activities in terrorism and proliferation financing, an effective anti-money laundering system is essential in order to improve the finance sector and the country’s reputation on a global platform.

The amendments supplement the AML Law with new rights for the Company Register, which allow it to request supporting documentation on the beneficial owners (BO) of a legal entity, if they have doubts about the legality of them. They may also temporarily postpone the registration of a new BO or to a change of BOs. This applies not only to new changes made to the list of BOs, but also to previous ones, where the legal entity had not provided sufficient documentation. A beneficial owner is a natural person who owns a legal entity, or it has been established in the natural person’s interests, who exercises control, directly or indirectly, over a legal entity.

The new changes apply to all legal entities, which have been registered in the Enterprise Register, not only subsidiaries of foreign merchants located in Latvia, but also limited liability companies (SIA), joint stock companies (AS), foundations, societies, farmers’ and fishery farms, partnerships, cooperative societies, European commercial companies, trade unions, political parties and religious organizations.

From now on, those legal entities, which have not disclosed their BOs, will face an effective liquidation process. The procedure goes as follows – the Register sends a pre-liquidation warning to the legal entity, with a request to disclose the BOs within one month. If the BOs will not be disclosed, the legal entity shall be terminated on the basis of a decision by the Register. The liquidation process then will proceed in accordance with the provisions of the Commercial Law on simplified liquidations.

However, if the legal entity has stated that it is not possible to identify the BO, then the board member has to certify this fact. Furthermore, amendments made in 2017 also propose an exemption from notifying the Register of their BOs, because they have been notified by default. These are – i) members of the LLC, if it is a natural person, who owns more than 25% of the shares, ii) members of the partnership, if it does not have more than 3 members, iii) owners of sole proprietorships, iv) owners, v) members of foundations’ boards. Unless the BO is another person, the legal entity has to notify the Register about this.

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