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Special fee proposed to reduce number of risky offshore clients for banks

Dana Reizniece-Ozola/flickr.com/Finance Ministry.
A special fee for risky transactions would help reduce the number of offshore clients for banks, said Finance Minister Dana Reizniece-Ozola after a meeting of the Cabinet of Ministers.

On Tuesday, 6 March, ministers went through Finance Ministry’s report on additional measures to combat money laundering and terrorism financing activities. The meeting was also attended by representatives of Saeima’s Budget and Finance Committee.

The minister mentioned after the meeting that the government had discussed multiple initiatives to help ensure stability in the finance sector. First of all, Finance Ministry received a government mandate to commence cooperation with international institutions to perform an audit at Finance and Capital Market Commission and Control Service.

Secondly, the government ordered the institution to consider ways to introduce a fee for risky transactions. This proposal will be developed by the ministry together with FCMC. Thirdly, the State Revenue Service proposed considering ways to control the cross-border flow of money. Finally, the ministry has to develop proposals for proper structuring of the deposit guarantee fund.

The idea behind all proposals is cutting the proportion of shell companies serviced by banks in the country by half in the next one and a half years.

The minister explained that shell companies are registered in jurisdictions that do not require submission of financial accounts – they have mailbox addresses instead of real ones, and they have no way to prove their economic activities.

When asked to explain the proposal regarding the fee for risky transactions, the minister mentioned that it can be applied to the portion of a bank’s turnover formed from transactions with shell companies.

She did not mention the exact amount the fee would be, because discussions still continue. At the same time, the finance minister emphasized that the goal behind the fee is not adding money to the budget, but rather motivating banks to reduce the proportion of serviced shell companies.

Reizniece-Ozola said that the fee is planned to be introduced gradually. «If a bank provides information about the client that proves the company is real that it performs economic activities and has an actual address, the bank can transform its business from risky to controlled,» said the minister.

When asked about the government’s decision in relation to the audit of institutions supervising the financial sector, Reizniece-Ozola said ministers and representatives of Saeima’s Budget and Finance Committee supported proposal for Finance Ministry to prepare materials with objectives for international institutions on the form, time and costs of audits in supervisory institutions.

«We continue working with the World Bank, OECD and International Monetary Fund to reach an agreement on the audit. Currently it is necessary to find someone able to perform the audit. Only then will we be able to decide on the terms. Quality is important, not speed. We need an external assessment institutions would use in their work,» said Reizniece-Ozola.


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