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Latvia Struggles with Flow of Illicit Money Despite Regulatory Crackdown

Richard Marley
May 28, 2021
2 minutes read
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Latvia continues to face illicit financial flow despite the regulatory crackdown that shut down the banks and financial institutions. This has been reported by the country’s anti-money laundering watchdog.

The regulatory authorities enforced strict measures on the financial institutions, especially the one that handled one percent of the dollar flow from the U.S. The investigation was increased when the U.S Treasury claimed that a local lender has been laundering money from shell companies in North Korea.

Latvia took necessary steps to clean up by replacing the regulator of its Central Bank, the governor of the Central bank, and the financial regulatory body. It even took steps to freeze the suspected funds, initiated a procedure for criminal investigations and expelled the shell companies. These strict regulations pushed the flow of illicit funds into the new countries through 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.”

The authority in Latvia is working towards putting back the reputation of the financial sector of the country. It froze up to $525 million of the funds that were suspected to be illicit.

The country planned on moving ahead with taking the cases to the court for the verdict if the money can be seized and if it can be used in the state budget or not. This process has been slowed a bit due to the COVID-19 pandemic but now the court is getting back into shape with complete dedication towards economic or financial crises.

The investigation into the illegal funds by the nation has got some international recognition. The European Commission has recently highlighted, in its review of the EU, that Latvia has shown significant progress in the fight against financial crimes like money laundering.

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Beijing – Within the last three years, the EU and US imposed several sanctions on Chinese companies and officials. To strike back, China has now created a new legal toolkit.

Organizations that have offices in both China and the US may have to face a tough choice – Those that comply with the American sanctions on China will be subjected to sanctions in China as a penalty for doing so.

On Thursday, Beijing introduced the law designed to serve as a strict reply to US and EU imposed sanctions. Those that comply with the restrictions, as well as their families, will be denied visas to China. Not only this, but their property in China will be seized and any transaction they perform with a Chinese company can be blocked.

A former commerce Vice Minister Wei Jianguo commented:

“This law is like the ringing of a gong. It is a warning to the U.S.: You should be worried. China will not endure this treatment as easily as it once did.”

At the moment, it is not clear how often and how rigorously China will impose its new anti-foreign sanctions legislation. This ambiguity has created a ruckus within the Chinese business community, which must develop China-specific standards and operations separate from their global operations, as China introduces its own legal landscape.

On the surface, the new anti-foreign sanction law simply lays down the number of countermeasures that Beijing has already taken in response to Western sanctions. It appears to merely target foreign politicians that pass sanctions on China in their own countries.

However, the ambiguity of the law is highly indicative of geopolitical crosshairs, as feared by the foreign business community. It has become particularly troublesome as the decisions related to sanction entities — such as companies, their employees, and their families — are final. There is no possibility to appeal.

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eIDAS and eIDs - The Shift in Identity Verification in the EU & Beyond
In the digital world, ensuring the security of international transactions is the ultimate goal of all companies. The European Union’s eIDAS or Electronic Identification and Trust Services legislation monitors identity verification, authentication and electronic transactions in the region. This legislation allows secure cross-border transactions and removes all digital barriers. Moreover, creating a predictable regulatory environment for a secure and swift electronic transaction system is a lot easier with eIDAS.

Let’s take a look at how identity verification has shifted in the EU.

What is an eID?

In the high-speed digital space we live in, the conventional government-issued ID documents like passports and ID cards are no longer effective. So, electronic or chip-based ID documents are now in use in many countries. The chip in this document contains all data about the individual allowing seamless ID authentication and verification in organisations.
Impact of the eIDAS Regulations

The regulations from the eIDAS:

Ensure that everyone can use their electronic IDs to access public services available in any EU region

Create an international market for trust services like e-signatures, e-seals, time stamps, etc. by ensuring that they will work across borders along with the same legal status as the paper-based ones

EIDAS Regulations for the United Kingdom

The electronic identification and trust services for e-transactions in the internal market are regulated by the eIDAS regulation 910/2014. However, the UK adopted eIDAS regulation and altered the regulations post-Brexit. Additionally, the Electronic Identification and Trust Services for Electronic Transactions Regulation 2016 was also changed. Now, these guidelines are referred to as the UK eIDAS laws.

Companies offering trust services in the EU have to comply with eIDAS laws of the European Union. This also includes operations under the supervision of a regulatory body from a different EU state.

Amalgamation of eIDAS and AMLD – Digital Single Market

The EU created a ‘Digital Single Market’ by incorporating Anti-Money Laundering (AMLD) with the eIDAS regulations. The digital single market brings uniformity in customer onboarding. Organisations across the European Union can remotely verify customers making customer onboarding frictionless.

The eIDAS regulation article 920/2014 provides AMLD with the control to verify and onboard clients in a safe, simple and remote way by removing all barriers in the customer acquisition process.

Suggested: | 6AMLD of EU – A detailed insight

The Legislative Framework for ID Verification by eIDAS

As per the eIDAS regulations, standards for digital identification are:

Create a credible ecosystem with maximum technical sureties to secure individuals and companies

Article 24 of the legislation avoids the personalisation act before getting a certificate in the Registration Entity and allows identity verification through video calls (generally called the video KYC process)

Consequently, it allows new licenses in eIDAS laws that lead to new digital identity verification mechanisms without harming the security of the processes

The eIDAS laws introduced digital identity verification methods for the first time in history. This reduces the physical interaction between companies and customers

The financial and telecommunication sectors are now capable of acquiring customers digitally anytime. The framework established by the eIDAS is entirely new for organisations and end-users

Apart from all these, eIDAS and AMLD5 together have reduced costs and saved time along with a great user experience during the customer onboarding process

Interoperability of eIDs as per eIDAS

Given the differences in eIDs across countries, the main goal of the eIDAS is to remove all sorts of barriers for identification. For instance, an individual with an Italian eID residing in Estonia should not be bound to use the Estonian eID. To ensure interoperability of the eIDs, the eIDAS is working on an IT infrastructure called eIDAS nodes.

Shufti Pro’s IDV Suite – Answer to the Shifting ID Verification Trends

Electronic or eIDs have changed the identity verification game. Now, customers believe in the digital process rather than physically visiting the company. However, the change in identity verification is not a problem anymore. Shufti Pro offers multiple alternatives for one problem. Although all our ID verification services are remote, there are two options that can help every firm irrespective of their industry. Let’s take a look at both of these:

1. NFC-based ID Verification

The chip in eIDs allows businesses to verify the identities of end-users in the blink of an eye. NFC-based identity verification validates identities through a tap on an NFC-enabled device.

Here’s how the process goes:

2. Video Interview KYC

Video KYC is another remote identity verification solution that we offer. During the video KYC process, the end-user gets in touch with the KYC expert on a live video call for authentication. The process has seven simple steps:

End-user registers on the company’s platform for KYC

KYC expert and the end-user get in touch on a live video call

The expert interviews customers for liveness detection

End-user shows the government-issued ID documents during the call

The document is verified for forgery and tampering

The face of the end-user is matched against the image on the ID document

Verification results are delivered and stored in the back-office

Note that the process is lengthy but takes only a minute or two to complete.

In a Nutshell…

Electronic or biometric identities are now a more convenient option for identification. The eIDAS issued guidelines on remote identity verification and seamless cross-border transactions in the European Union. The interoperability of eIDs across member states is still under consideration. However, eIDAS is working on an IT infrastructure to remove hurdles for cross-border use of eIDs. The laws also state multiple methods for remote identity verification and fortunately, all of Shufti Pro’s identity verification solutions validate IDs remotely. The two most appropriate services for the EU member state and the UK are Video Interview KYC and NFC Verification.

For more information, get in touch with our experts.

Talk to Us

Latvia Struggles with Flow of Illicit Money Despite Regulatory Crackdown

Impact of the eIDAS Regulations

EIDAS Regulations for the United Kingdom

Amalgamation of eIDAS and AMLD – Digital Single Market

The Legislative Framework for ID Verification by eIDAS

Interoperability of eIDs as per eIDAS

Shufti Pro’s IDV Suite – Answer to the Shifting ID Verification Trends

1. NFC-based ID Verification

2. Video Interview KYC

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

Latvia Struggles with Flow of Illicit Money Despite Regulatory Crackdown

What is an eID?

Impact of the eIDAS Regulations

EIDAS Regulations for the United Kingdom

Amalgamation of eIDAS and AMLD – Digital Single Market

The Legislative Framework for ID Verification by eIDAS

Interoperability of eIDs as per eIDAS

Shufti Pro’s IDV Suite – Answer to the Shifting ID Verification Trends

1. NFC-based ID Verification

2. Video Interview KYC

In a Nutshell…

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.