FATF status

Latvia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The latest Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Latvia was undertaken in 2019. According to that Evaluation, Latvia was deemed Compliant for 7 and Largely Compliant for 33 of the FATF 40 Recommendations. It was also deemed Highly Effective for 0 and Substantially Effective for 1 with regard to the 11 areas of Effectiveness of its AML/CFT Regime

Corruption remains a significant issue in Latvia, as highlighted by its 36th ranking in the 2023 Corruption Perception Index. The government has enacted various laws to combat corruption, including those addressing money laundering and conflicts of interest, while the Corruption Prevention and Combating Bureau (KNAB) plays a key role in enforcement. Despite these efforts, challenges persist, particularly in public procurement processes, where perceived unfairness and demands for bribes continue to hinder business operations.

Latvia, located in the Baltic region, has adopted liberal economic policies to attract foreign investment and foster growth, positioning itself as a transportation and logistics hub between the EU and Central Asia. Despite a contraction in GDP by 0.6% in 2023 due to external pressures, the country maintains competitive sectors such as woodworking, IT, and green tech, while facing challenges like a labor shortage and a significant shadow economy.

Latvia actively encourages foreign direct investment (FDI) and offers a liberal investment climate, treating foreign investors similarly to local ones. The government has established special economic zones that provide various tax benefits, and it has abolished taxes on reinvested profits to enhance competitiveness. However, challenges such as a shortage of skilled labor and concerns regarding transparency in public procurement processes persist.