Guidelines will identify jurisdictions that create permanent and substantial money laundering and terrorist financing threats according to the level of risk. It will also set out the minimal standards for ALCB banks with respect to risk evaluation of client jurisdictions. At this point each bank uses individual standards for customer evaluation.
Latvian banks implement improvements of control mechanisms on an ongoing basis to upgrade compliance standards, identify and manage potential risks, as well as prevent unlawful activities. Latvian banking sector started a significant and comprehensive improvement process in 2016 by implementing compliance remediation plans to ensure highest standards in countering money laundering and terrorist financing (AML/CFT).
Improvements fall into five main compliance categories - Governance, Internal controls, Training, Independent testing as well as automated banking system enhancement, with a special focus towards internal controls. Good early results are seen due to applying increased AML/CFT standards:
• Banks have implemented 68% of the remediation plans by the Q1 of 2017;
• Latvian banks significantly reduce risk exposure. The number of clients de-risked in 2016 increased by 39% in comparison to 2015.
• There is a special focus to further automation. Investments in IT systems provide significant automation of client and their transaction monitoring. They are effective tools to detect and prevent potential illicit activity at early stages.
As a result, there have been significant changes in the past two years towards strengthened compliance functions of the banks, especially in AML control and international financial sanction enforcement. The industry's policies and procedures in relations with High Risk customers are developed and regularly reviewed according to existing risks as well as the highest international standards. This also includes conclusions and recommendations after the independent US expert (Navigant, Exiger and Lewis Baach Kaufmann Middlemiss) review in 11 member banks of the Association.
The Council stressed that Association as the representative of Latvia's banking sector, has a zero tolerance of breaches and the use of Latvia's banking system for illicit activities that do not comply with international standards and regulations. Latvian banking industry is committed to complying with applicable financial sanctions requirements of the European Union (EU), the United Nations (UN), Latvia and individual foreign countries like the United States. The Association and its member banks will continue working together to prevent the use of Latvia's banks for financial crime.
Banks of the Association are aware that improvement of control mechanisms is a consistent and ongoing process based on adequate and real risk assessment. All cases when bank control systems have been insufficient are carefully investigated by the executive management of banks. Appropriate systems are improved based on these reviews to ensure effectiveness and detection of illicit activity.
The Association supports clear and decisive action by banking sector regulators in remediation process. Association also expects comprehensive investigation by the law enforcement institutions to allow for legal action against entities who are trying to use Latvian financial system for illegal purposes.
About the Council of the Association of Latvian Commercial Banks:
For supervision of the Association activities, the general meeting elects a Council consisting of 8 members for the term of three years - ABLV Bank, BlueOrange (Baltikums Bank), Citadele banka, DNB banka, Nordea banka, Norvik banka, SEB banka, Swedbank.
Chairman of the Council: Guntis Beļavskis, Chairman of the Board of Citadele banka.
Association Council ensures the convention and organization of the General Meeting, accepts new members to the Association; considers matters connected with the use of Association budget and creating necessary fund for effective activity of the Association; solves other matters, connected with the Association activities, which, in accordance with its Charter, are not within executive competence of the general meeting, President or Auditing Commission; develops common stance in solving matters of importance for banks; approves the Association's action projects, as well as the main documents stipulating its operation.