According to the Latvian regulatory framework—the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing[1] (hereinafter AML/CFT/CPF)—and the 2022 Methodology for Assessing Technical Compliance with the FATF Recommendations[2] (hereinafter FATF Methodology), the country is required to identify, assess, and understand its national risks related to money laundering, terrorism financing, and proliferation financing (hereinafter ML/TF/PF). This evaluation underpins a risk-based approach, ensuring that measures aimed at preventing or mitigating ML/TF/PF risks are proportionate to the significance of the identified threats.
Latvia adheres to international FATF standards and engages in regular evaluations of both technical compliance and the effectiveness of its AML/CFT/CPF system. This ongoing process enables continuous adjustments to policies and internal controls to ensure they are appropriately targeted and effective in line with the outcomes of the FATF Methodology.
The recognition and understanding of ML/TF/PF risks form the foundation for developing a robust risk mitigation system, which is further enhanced by the integration of targeted policy decisions and appropriate internal control procedures within the private sector. To support this, Latvia conducts a comprehensive national ML/TF/PF risk assessment (hereinafter NRA), which provides valuable insights into identified risks in the AML/CFT/CPF system. This assessment helps optimize resources for mitigating and preventing risks while enhancing public and institutional understanding of these risks.
International standards emphasize that countries must regularly perform high-quality risk assessments due to the global nature of ML/TF/PF schemes. In Latvia, the Financial Intelligence Unit prepared the NRA report for 2020–2022[3], developed in accordance with World Bank guidelines and FATF principles. Based on extensive data gathered by Latvian authorities, the NRA indicates improvements across all FATF-defined indicators, reflecting an overall decrease in national ML risk compared to the previous assessment for 2017–2019[4].
The NRA incorporates recommendations from Moneyval evaluators and current trends in Latvia, serving as a valuable tool to identify previously unknown threats and vulnerabilities. It facilitates the prioritization of measures to reduce these risks. For the private sector, the NRA supports the establishment of effective internal control procedures, while for policymakers, it serves as a foundation for further action in anti-money laundering.
The analytical efforts underpinning the NRA and other strategic analyses are crucial for identifying areas for continuous improvement within Latvia's AML/CFT/CPF system. Findings from the NRA contribute to the development of national AML/CFT/CPF Action Plans[5], outlining specific activities to address weaknesses identified within the framework. This policy document remains essential to nationwide efforts aimed at strengthening Latvia’s defenses against ML/TF/PF activities.
[1] Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing. https://likumi.lv/ta/en/en/id/178987-law-on-the-prevention-of-money-laundering-and-terrorism-and-proliferation-financing
[2] 2022 Methodology for Assessing Technical Compliance with the FATF Recommendations and the Effectiveness of AML/CFT/CPF Systems. Amended in August 2024. https://www.fatf-gafi.org/content/dam/fatf-gafi/methodology/FATF-Assessment-Methodology-2022.pdf.coredownload.inline.pdf
[3] National ML/TF/PF risk assessment report for 2020 – 2022. https://www.fid.gov.lv/uploads/files/NRA%202020%20-%202022.pdf
[4] National Risk Assessment for the period from 2017 to 2019. https://www.fid.gov.lv/uploads/files/2021/NRA_2017_2019_Executive_Summary%20%28002%29.pdf
[5] https://likumi.lv/ta/id/351737-par-pasakumu-planu-noziedzigi-iegutu-lidzeklu-legalizacijas-terorisma-un-proliferacijas-finansesanas-noversanai-20242026gadam