Ilze Znotiņa, the main financial intelligence of the state, has been annoyed by the slow legislative process and especially by the Saeima deputy Gatis Eglītis, who dares to submit various proposals. However, the examination of amendments to the Anti Money Laundering Law continues its current course. It will not be rushed, nor will Eglītis be silenced. The head of the responsible committee Juris Rancāns believes that Financial Intelligence Unit (FIU) is fueling unnecessary emotions.
The Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing needs to be amended to bring it into line with the requirements of the international auditor of lenders FATF. Hoping that the draft law would be pushed through the Saeima as a matter of urgency, the Defense, Internal Affairs and Corruption Prevention Committee was appointed as the responsible commission. It mostly deals with crimes, not financial matters. And the specific amendments to the law are not so much related to the fight against terrorists or some money launderers, but how the business system in Latvia will be able to function in the future and how banks will be able to serve it. Therefore, it is very useful that the Defense Committee has been assisted by Deputy Gatis Eglītis, who heads the Saeima Financial Sector Supervision Subcommittee, and is one of the few who is able to analyze the proposals brought by the Ministry of Finance and the FIU. If necessary, reject them and instead submit his own.
The head of the Defense Committee Juris Rancāns cites as an illustrative example the excessive requirements of reputation, which were included in the original version of the draft law. If, in the opinion of the supervisory authorities, the reputation of the party or its partner was not crystal clear, if some papers were not in order or they had stolen a pastry in childhood and it came to light, it was intended to seize the company's shares. That would be utter nonsense - nationalization in the communist spirit. However, the Saeima committee eliminated this defect developed by the Ministry of Finance, FIU and the government.
In order to protect entrepreneurs from the arbitrariness and excessiveness of the supervisory services, Eglītis also suggested limiting the maximum time for which the FIU is entitled to freeze the money in the accounts. That is exactly what Ilze Znotiņa was very angry about, she wrote a letter to the deputies, criticizing Eglītis' proposals, and also complained on the state television. In the end, everything has been settled. She came to the committee with a presentation, showed time schedules and explained why the unit could not check anything in five days. MPs understood and withdrew the proposal. "But it is not abusive lobbying. I understand Znotiņa, she looks at everything only from the point of view of her office's interests - the Prime Minister demands from her compliance with the FATF recommendations. But those emotions are exaggerated. If I don't agree with you, that doesn't mean I'm your enemy!” Juris Rancāns, the head of the responsible committee, comments on the situation.
As for the objectives of the new regulation, they are in some opposition to the wishes of the supervisory services from the point of view of economic interests. It is not normal for, for example, an IT company working with a customer in the United Arab Emirates to be automatically placed on the list of suspects, but the bank servicing the transaction to face a fine of up to one million. At present, banks' risk appetite is close to zero. It is more profitable for them to refuse the customer at even the smallest risk. This is a burden for entrepreneurs, and it is a mistake that needs to be corrected in the law, explains the head of the committee. The last meeting of the committee is planned today before the third reading of the draft law. Several technical questions, some postponed to the end. Theoretically, the law could be adopted before the end of the summer session, but it largely depends on the coalition's ability to agree on priorities. At present, the agenda of the Saeima is overloaded, because each party believes that the issues it raises are the most important on the political agenda.
However, no end of the financial world has occurred since the urgency of this particular bill was lifted, nor will it occur if lawyers have the opportunity to process all voted proposals carefully before sending them to the final reading.
There is still the possibility of penalizing economic operators for non-reporting or misrepresentation of transactions to supervisory authorities. The company Lursoft has studied the applied practice of the State Revenue Service. 646 persons have so far been punished for non-compliance with the requirements of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing and the Sanctions Law. Most offenders are fined. The amounts range from 50 euros to 10 thousand euros. The information published by the SRS shows that in 2017 the penalty for violations of these laws was applied only to one company, because it did not submit a report to the SRS on the type of activity, as well as did not respond to the institution's request for information. The number of fined merchants has increased in the following years.
Already in 2018, 29 legal persons were fined, while in 2019 and 2020, the number of persons fined approached 300. Lursoft has discovered that 295 persons were fined last year. In turn, until March 24 this year, 30 persons have been punished for the violations.
As emphasized in the Lursoft review, “unlike in 2018 and 2019, when in some cases violators were warned, both this year and last year, fines were imposed in case of all detected violations. In almost a third of cases, the amount of the fine was in the range of up to 500 euros, while in more than half (54%) cases, the amount of the fine was in the range of 500 to 2000 euros.” The total amount of penalties imposed by the SRS on companies for non-compliance with AML requirements exceeds 750 thousand euros.
So now the principle - consult first - has been abolished. The new principle in the supervision of entrepreneurs is - penalties first and no need to consult.
The following infringements were most often detected in the fined companies:
PMLTPF internal control system is incompletely developed;
PMLTPF risk assessment of all clients has not been performed;
Customer research documents cannot be presented;
The risk assessment of PMLTPF and sanctions is not documented;
The true beneficiaries of the clients and their affiliation with the status of a politically significant person have not been determined;
Suspicious transactions have not been reported to the Financial Intelligence Unit;
No monitoring of customer transactions;
No person responsible for legal requirements has been appointed.
Data: Lursoft
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