Information about legislative changes to be made known to Bank’s customers
At the end of April 2018, the Parliament (Saeima) of the Republic of Latvia passed the resolution to amend the AML/CFT Act (Money Laundering and Terrorist Financing Prevention Act) of the Republic of Latvia. Certain amendments envisage imposing stringent restrictions on banks incorporated in the Republic of Latvia. The restrictions apply specifically to cooperation with bank customers (corporates vehicles) which meet the criteria of shell companies and are therefore labelled as shell companies.
Under the AML/CFT Act („Noziedzīgi iegūtu līdzekļu legalizācijas un terorisma finansēšanas novēršanas likums”), a shell company (shell arrangement) means a legal entity that can be identified by one or more red flag indicators:
- a legal entity’s connection with its actual business operations is not provable; the legal entity produces little to no independent economic value; the credit institution does not possess any documentary proof to the contrary;
- the laws of the jurisdiction of the entity’s incorporation do not envisage the obligation to prepare and file its annual financial statements with relevant supervisory authorities, including annual financial statements;
- the legal entity does not maintain a permanent establishment / a fixed place or business (premises) in the jurisdiction of the entity’s incorporation.
Already in autumn 2016, Baltic International Bank adopted its new operational strategy geared towards wealth management and investing activities. In 2017, Bank embarked on reshaping its business model and aligning it with the strategy. The implementation of the new business model entailed a substantial change in the structure and the number of Bank’s customers in the first half-year of 2017. Also, we saw a decrease in the number of customers using corporate vehicles, known as shell arrangements, for their financial operations. In 2016, Bank’s USD-denominated transactions with shell arrangements, as a percentage of Bank’s aggregate number transactions, reached nearly 11% (in the first half-year of 2017: below 3%).