Latvia and Money Laundering: An Examination of Regulatory and Institutional Effectiveness in Combating Money Laundering
ABSTRACT: In the wake of the Cyprus bailout, illicit financial flows and money laundering have shown their systemic threat to the stability of not only the Eurozone but to the international financial system. Great attention is being paid to countries’ anti-money laundering efforts and on the stability of their banking sectors. This attention has increased with the revelation that Latvia is to become the latest member of the Eurozone due to its banking sector used to launder illicit capital. Long seen as a centre for capital from Eurasia, and the scene of multiple instances of financial malfeasance, great concentration has been placed on its efforts to reform its regulatory and oversight capabilities. Despite the improvement, Latvia continues to experience large amounts of capital flow from Eurasia and is the continued scene of money laundering efforts. We examine the efforts of the regulatory institutions to combat money laundering and of the use of the banking sector for illicit purposes. We find that while there has been significant improvement in the regulatory capabilities of authorities, Latvia continues to be a locale for the laundering of capital from Eurasia and that without continued institutional improvement the situation is unlikely to change.
Keywords: Latvia, EU, Eurozone, Money Laundering, Tax Evasion, Financial Crime, Russia, Ukraine, Eurasia