Identifier
Created
Classification
Origin
08RIGA324
2008-06-06 14:49:00
CONFIDENTIAL
Embassy Riga
Cable title:  

SAEIMA PASSES NEW MONEY LAUNDERING LAW, WITH A

Tags:  PGOV EFIN KCOR LG 
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DE RUEHRA #0324/01 1581449
ZNY CCCCC ZZH
P 061449Z JUN 08
FM AMEMBASSY RIGA
TO RUEHC/SECSTATE WASHDC PRIORITY 4991
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 RIGA 000324 

SIPDIS

E.O. 12958: DECL: 06/05/2018
TAGS: PGOV EFIN KCOR LG
SUBJECT: SAEIMA PASSES NEW MONEY LAUNDERING LAW, WITH A
CATCH

Classified By: CDA STUART SELDOWITZ FOR REASON 1.4(b)

C O N F I D E N T I A L SECTION 01 OF 02 RIGA 000324

SIPDIS

E.O. 12958: DECL: 06/05/2018
TAGS: PGOV EFIN KCOR LG
SUBJECT: SAEIMA PASSES NEW MONEY LAUNDERING LAW, WITH A
CATCH

Classified By: CDA STUART SELDOWITZ FOR REASON 1.4(b)


1. (C) Summary. On Thursday, June 5 the Saeima (parliament)
voted to approve the long-awaited, new Anti Money Laundering
(AML) laws to bring Latvia in compliance with EU norms.
During the final vote, however, six new amendments, which
greatly reduce the effectiveness and usefulness of the law,
were added and approved. Opposition party New Era and the
Prosecutor General have expressed deep concern over the issue
and New Era has submitted a letter requesting that Latvian
President Zatlers send the law back to Saeima. Although some
feel that the law should be approved and amended later, as it
is already grossly overdue to the European Commission, others
believe that it is no longer in line with the European
Commission requirements, and cannot be approved. End Summary.


2. (C) In an unexpected move on Thursday, a majority of
Saeima members voted to include several amendments to the new
AML law, essentially reducing the power of law enforcement
officials to share information among themselves and greatly
reducing their ability to prosecute money launderers. MP V.E.
Bresis (Greens and Farmers - Aivars Lembergs' party)
submitted six proposals during the Saeima session. He stated
they had been prepared by a lawyer, but would not specify
which. (Comment: Bresis is being called a "postman" and is
not seen as the driving force behind the changes. Speculation
is that Aivars Lembergs is involved, but this has not been
confirmed. End comment.) Our contacts in the Financial
Intelligence Unit (FIU) in the Prosecutor General's office
stated that these proposals had been submitted earlier in the
legislative process, but initially refused outright.
Essentially, the amendments allow organizers of money
laundering schemes to avoid criminal responsibility. The new
text redefines money laundering: where the old text stated
that money laundering was assets illegally obtained both
directly (from a victim) and indirectly (from an
intermediary, etc.) the new text eliminates the illegality of
"indirectly". Money launders would be prosecuted if and only
if direct intent could be proven. Press commentators
speculate that this would make it much harder to prosecute

Latvia's oligarchs for corruption. The new changes also limit
communication between law enforcement offices, forcing all
dialogue to go through the Prosecutor General's office.


3. (C) There are two distict halves of the new law: the
banking section and the law enforcement section. While the
effectiveness of the law enforcement half has been
significantly reduced the banking portion has been improved.
For example, the new law reduces the amounts of cash
transactions and international transfers necessitating
investigation. There is one negative change on the banking
side: previously all employees were trained in how to detect
money laundering. The new law reduces that to only people
responsible for money laundering issues. Our contacts at the
Financial and Capital Market Commission (FCMC) state that
this is of minor concern, as it's easy to work around to
continue the same level of across-the-board training. More
pressingly, the new AML laws are mandated by the European
Commission, and Latvia's deadline for implementation was
December 15, 2007. Having missed that date, and facing
possible penalties, our FCMC contact states that, unless
these concerns can be addessed expediciously, it is better to
pass the law and amend the trouble areas later in the fall.


4. (C) There has been an outcry from New Era and the
Prosecutor General's office against the Saeima changes. Our
New Era contact in the Saeima Legal Affairs Committee stated
that these laws were originally lobbied both by the U.S. and
the EU in order to fight money laundering and the finance of
terror. Acceptance of the new AML law, in compliance with
European Commission directives, has already been greatly
delayed. However, our contact considers the last-minute
amendments untenable because they tone down the power of the
Prosecutor General's office and change the definition of
money laundering altogether, making it easier for oligarchs
and those with business interests in Latvia to continue to
use their offshore accounts. Our contact stated that he
cannot immediately forsee this system being used for the
finance of terror, but that someone looking for one to use
for this purpose would find an easy conduit. New Era has
submitted a letter to Latvian President Zatlers, asking him
to send the law back to Saeima for further consideration.
President Zatlers has seven days to either sign the law or
send it back to parliament.


5. (C) Bankers are not opposed to Zatlers sending the law
back to Saeima. Although they understand the need to meet the
European Commission's deadline for the AML law, they can
understand the concern generated by yesterday's changes to
the text. Furthermore, a contact in the banking industry
stated that he believes the new document is no longer in

RIGA 00000324 002 OF 002


compliance with the European Commission's requirements. This
would be the most compelling argument to review the document
again. It would also allow Post to step back and let the
Latvian authorities correct their own system without our
higher-level input.


6. (C) Comment. The long-awaited revised AML laws have
succeeded in surpassing the worst case scenario. Not only
have they taken far longer to draft and revise than
originally mandated, but the final vote has proven the old
adage, "the best laid plans of mice and men..." If accepted,
the laws will add further road blocks to the prosecution of
Latvian oligarchs for corruption. That said, although the
situation is worrysome, the noncompliance with European
Commission requirements may be the tack that is needed to
force the issue and finally pass the useful document that
Latvia, the EU and the U.S. have expected for over a year.
End Comment
SELDOWITZ