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

Corruption remains a significant issue in Latvia, as highlighted by its ranking of 36th in the 2023 Corruption Perception Index. The government has implemented various laws to combat corruption, including the Law on the Prevention of Money Laundering and the Law on Prevention of Conflicts of Interest, while the Corruption Prevention and Combating Bureau (KNAB) plays a key role in enforcement. Despite these efforts, challenges persist, including a lack of transparency in public procurement and limited prosecutions of corrupt officials.

Latvia, a small Baltic nation and EU member, has adopted liberal economic policies to attract foreign investment and position itself as a transportation and logistics hub between the EU and Central Asia. Despite a GDP contraction of 0.6% in 2023 due to external pressures and high interest rates, Latvia's economy benefits from a highly educated workforce and 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 provides equal rights and obligations for foreign and local investors. The government has established special economic zones offering various tax benefits and has abolished taxes on reinvested profits to enhance competitiveness. However, challenges such as a shortage of skilled workforce and perceived lack of transparency in public procurements may affect the investment climate.