NJORD Latvia: Companies, which failed to disclose their beneficiaries, will be excluded from Latvian Register of Enterprises
On 29 June 2019, new amendments to the law “On the Prevention of Money Laundering and Terrorism Financing” (the Law) became effective. In accordance with these amendments, the Register of Enterprises of the Republic of Latvia (the Register) was granted the right to liquidate a commercial company, if it failed to submit to the Register information on its beneficial owners (beneficiaries).
Legal persons registered in the Commercial Register of the Republic of Latvia prior to 1 December 2017, had to determine their beneficiaries and to file information on them for registration to the Register of Enterprises of the Republic of Latvia until 1 March 2018. As it follows from information published on the website of Latvian Register of Enterprises on 17 June 2019, “...approximately 900 SIA have not disclosed their beneficial owners yet…”
In accordance with new procedure, having established that a commercial company (SIA or AS) failed to submit information on their beneficiaries, the Register will send written notice to the legal address of a commercial company, and will give one month to eliminate violation. If upon expiration of one-month period the violation will not be eliminated, the Register will decide on discontinuation of activity of a commercial company, by “launching” procedure of exclusion from the Commercial Register. Such decision of the Register shall enter into force within one month after it was notified to a commercial company, if the decision was not challenged or appealed.
The Register has already selected the first group to be raided – SIA (limited liability companies) where shareholders are foreign legal persons and who failed to submit information about beneficiaries. “Offenders” are expected to receive warnings from the Register in nearest future or even have received it.
Brief information on some other novelties of the Law:
- “The Office for Prevention of Laundering of Proceeds Derived from Criminal Activity”, or shortly - the Control Service is now called “Financial Intelligence Unit”.
- As from 1 January 2020, information from all registers of the Register must be available to any person free of charge.
- As from 1 July 2020, obligation of “foreign subjects”, who have branches and representative offices in Latvia (inter alia, those registered only in the register of tax payers of Latvian State Revenue Service) to disclose their beneficiaries and to inform the Register on them until 1 January 2021. Those, who will fail to comply with provisions of the Law, will be excluded from the respective Register.
- subjects of the Law (i.e., banks, financial institutions, notaries, attorneys-at-law, tax advisers, auditors, etc.), as well as controlling and supervisory authorities, having established that information on a beneficiary specified during survey of the client does not comply with data in the Register, have to inform the Register about it. The Register, upon receipt of such notification, will register the warning that registered information on a beneficiary is, possibly, false.
- when having reasonable doubts concerning information submitted by the legal person, the Register has the right to request from the legal person documentary justification of the monitoring performed, as well as the document confirming compliance with information identifying a beneficiary and a document justifying confirmation concerning impossibility to determine a beneficiary (if such information was already filed).
- When having doubts regarding information filed by a shareholder/owner on absence of a beneficiary, or if foregoing information was not filed at all, and the legal person has a reasonable ground to believe that it has a beneficiary, the legal person by its own initiative will specify and identify its beneficiaries.
- following sanctions are set forth for failure to comply with provisions of the Law: suspension or termination of activity of the commercial company, including suspension or termination of a license (certificate) or annulment of entry in respective register, suspension of economic activity, prohibition of registration of changes in the Commercial Register concerning reorganisation of a commercial company and changes in shareholders, instruction to credit institutions or payment service providers regarding partial or complete suspension of payment operations.