At the meeting of April 18 this year, the Cabinet of Ministers approved amendments proposed by the Ministry of Economics to Regulations of the Cabinet of Ministers No. 705 Regarding the Requirements of the Prevention of Money Laundering and Terrorism Financing for the Providers of Consumer Crediting and Debt Recovery Services, which will promote implementation of an internationally recognised risk assessment-based approach in the process of customer due diligence and risk assessment of lenders and debt recovery service providers (the lower the customer’s risk, the lower the due diligence volume, and the higher the customer’s risk, the higher the due diligence volume). Amendments to the Regulations of the Cabinet of Ministers will come into force on June 1 this year so that merchants can adapt to the new requirements.
As it is known, these Regulations of the Cabinet of Ministers lay down requirements for providers of consumer crediting and debt recovery services to comply with the anti-money laundering and countering terrorist financing (AML/CFT) requirements. Along with the amendments approved today, the Regulations of the Cabinet of Ministers have been aligned with several amendments made in 2019-2022 to the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (hereinafter referred to as the Law).
CRPC, as the supervisory authority, has a duty to monitor how persons engaged in consumer crediting and persons engaged in the provision of debt recovery services and to whom the CRPC issues a special permit (licence) ensure compliance of the provision of services with the Law and these Regulations.
The amendments require the lender to further assess the indications and factors decreasing and increasing the customer’s risk and to classify the customer to one of the customer risk levels, for example, “low”, “medium” and “high”. It is possible to apply due diligence measures according to the level of risk identified. Thus, customer due diligence will be subject to requirements that are inherently useful and proportionate.
The amendments also set a time limit for assessing the compliance with AML/CFT requirements by the employee responsible for compliance assessment. Lenders and providers of debt recovery services will have to ensure evaluation of these employees at least once every three years – whether the responsible employee complies with the requirements laid down in the Law. In addition, cases for immediate re-evaluation of the responsible person have been defined.
To enhance the effectiveness of supervision and to prevent possible violations of AML/CFT requirement, in cases where existing AML/CFT procedures are evaluated or audited, or new documentation is developed, amendments to the Regulations of the Cabinet of Ministers require the lender and the provider of debt recovery services to submit these documents to the CRPC not later than 10 days after their approval.
At the same time, we note that in the near future the CRPC will update the guidelines for supervised subjects of the Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing and the Law on International Sanctions and National Sanctions of the Republic of Latvia, which have been developed in order to promote a common understanding regarding the application of the AML/CFT requirements and the requirements of Regulations of the Cabinet of Ministers No. 705 and provide practical assistance in their fulfilment.
Amendments to Regulations of the Cabinet of Ministers No. 705 of 13 November 2018 “Regulations Regarding the Requirements of the Prevention of Money Laundering and Terrorism Financing for the Providers of Consumer Crediting and Debt Recovery Services” may be studied in detail on the Legislation Portal.