Dirty Money Flows Continuing Over New Channels, Latvia Says
(Bloomberg) -- Flows of illicit money are continuing through new channels after Latvia shut banks and instituted a crackdown, the head of the nation’s anti-money laundering watchdog said.
Authorities imposed strict measures on the financial industry, which at one point handled as much as 1% of U.S. dollar flows. Scrutiny increased when the U.S. Treasury accused a local lender of money laundering and handling money for North Korean shell companies in 2018.
In the ensuing cleanup, Latvia replaced its bank regulator, anti-money laundering watchdog and central bank governor; froze suspect cash, expelled suspicious shell companies and opened a raft of criminal probes. The tougher restrictions have pushed the flows of dirty money into new countries and over different channels.
“Where are those flows now? They are definitely continuing to circulate in Europe and of course the world,” Ilze Znotina, director of the financial intelligence unit, said in an interview. “We unfortunately have to start to think a lot more about different financial services, for example payment companies, e-money companies” and virtual money providers that have taken on handling the flows, she said.
Latvian authorities, who’ve been working to restore the reputation of the Baltic nation’s financial sector, froze a record 429 million euros ($525 million) in suspect cash last year.
The next step is taking the cases to court for rulings on whether the money can be seized, transfered to injured parties or potentially the state budget. The coronavirus has slowed the process, but this year a new court dedicated to economic crimes began work.
Police said on Thursday they confiscated property worth 230,000 euros related to the tax fraud uncovered by Sergei Magnitsky, a lawyer who died in a Moscow prison.
The crackdown on illicit finance has won some praise. The European Commission, in its review of EU nations, cited only one field where Latvia had shown substantial progress, in the fight against money laundering. Moody’s Investors Service also lauded the euro-sharing Baltic country when it affirmed its rating at A3, the sixth-highest investment grade rating, this month.
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