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, with the 2023 Corruption Perception Index ranking the country 36th out of 180. Despite the government's efforts to combat corruption through various laws and the establishment of the Corruption Prevention and Combating Bureau (KNAB), the enforcement of anti-corruption measures has been limited, and public procurement processes are often perceived as lacking fairness and transparency. Additionally, while laws criminalizing bribery exist, their implementation is inconsistent, and demands for bribes continue to pose challenges for businesses operating in the country.

Latvia's economy, located in the Baltic region, is characterized by its liberal economic policies aimed at attracting foreign investment, particularly in transportation and logistics, given its strategic position between the EU and Central Asia. Despite a contraction of 0.6 percent in GDP in 2023, largely due to external factors such as high interest rates and the war in Ukraine, Latvia maintains competitive sectors including woodworking, IT, and green tech, while facing challenges like a shortage of skilled workforce and a significant shadow economy.

Latvia has established a favorable investment climate by implementing liberal economic policies and developing its infrastructure, particularly as a transportation and logistics hub between the EU and Central Asia. The government actively encourages foreign direct investment, offering equal rights to foreign and local investors, and has created special economic zones that provide various tax benefits. Despite challenges such as a shortage of skilled labor and concerns over transparency in public procurements, Latvia's competitive sectors include IT, transportation, and green tech.