Latvia Country Summary

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

Latvia continues to grapple with significant challenges related to corruption and organized crime, as both law enforcement and civil society recognize these issues as persistent problems. While the government has implemented various anti-corruption laws and established institutions like the Corruption Prevention and Combating Bureau (KNAB) to enhance transparency and accountability, the effectiveness of these measures is often undermined by a perceived lack of fairness in public procurement and limited prosecutions of corrupt officials.

In terms of organized crime, Latvia serves as a transit hub for human trafficking, drug smuggling, and arms trafficking, with vulnerabilities exacerbated by its strategic location and economic conditions. Despite these challenges, there are ongoing efforts to strengthen governance and law enforcement resilience, although public trust remains low and the judicial system faces scrutiny regarding its independence and effectiveness in combating crime.

Latvia's economy is characterized by its strategic position as a transportation and logistics hub between the EU and Central Asia, supported by a well-developed infrastructure that includes ice-free ports and a comprehensive rail and road network. Despite facing challenges such as a recent GDP contraction due to geopolitical tensions and high interest rates, Latvia remains attractive for foreign investment, offering equal rights to local and foreign investors, tax incentives in special economic zones, and a highly educated, multilingual workforce with competitive labor costs. The government actively promotes foreign direct investment and has made strides in improving the business climate, although concerns about transparency in public procurement and a significant shadow economy persist, impacting investor confidence.