Shell companies under new regulation in Latvia
According to the recent amendments in Law on the Prevention of Money Laundering and Terrorism Financing (hereinafter – Amendments), all Latvian financial institutions will be obliged to terminate all legal relationships with so-called shell companies.
The Amendments mainly are adopted in anti-money laundering regulations in order to prevent funds legalization with illegal origin and/or terrorism financing.
Amendments state that legal persons will be regarded as a shell company, in the case, if it simultaneously fulfils two criteria, which is – entity does not performing any economic activity, or it has insignificant economic value, and the entity’s registration country’s regulations do not oblige legal persons to submit its financial reports to the competent authorities. In other words, shell company in the light of Amendments could be compared with so called offshore company.
Amendments are in force since May 9, of 2018. All financial institutions are obliged to inform all their clients, whether they will be regarded as a shell company in 14 days from May 9, and 60 days from May 9 they must, according to the Amendments, terminate all legal relationships with shell company, including providing any financial services. After legal relationships are terminated, all funds will be transferred to the client’s bank account in other bank, or it will be transferred to the last bank account, from which it was transferred initially, or funds will be returned in cash, in the case fund transfer is not possible.
It has to be noted, that financial institutions, after they terminate all legal relationships with the shell company, are obliged to inform Latvian national authorities, if they have any doubts about legal origin of the shell company’s funds. In this case, all fund will be frozen, until competent authorities will check origin of the shell company’s funds.
New Amendments in Latvian regulation will affect all financial sector in Latvia and will oblige all financial institutions to terminate providing of financial services to any person, which will be regarded as a shell company.
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