Moving in 2014, Latvia has become the 18th state to adopt the euro as its national currency. In doing so, the country's leaders reportedly hope to facilitate trade, improve the local economy and pursue their long-term goal of duplicating the economic success of Switzerland.
According to some concerned officials, the currency change could also facilitate money laundering.
Latvia has one of the highest ratios of banks in the entire union, with one for every hundred thousand residents. It's also one of the most stable countries in the region, two factors which could lead it to become an attractive destination for organized crime figures. Thus, any foreign banks doing business with local financial institutions have to be particularly careful about doing their due diligence, and remaining on the right side of all AML compliance regulations.
This issue is especially pertinent because 65 percent of the banks in Latvia are considered boutique, in that they rely mostly on foreign sources of funding and do little lending to residents or businesses. For such tricky situations, the need for firm policies greatly increases in importance. While Latvian regulators insist that they have proper controls in place to deal with the influx of international capital, some foreign officials are skeptical. Nigel Farage, leader of the United Kingdom's Independence Party, is just such a person.
"There are many member states of the EU whose standards are frankly below what we should be dealing with. Latvia is one of them and we should not be in this political union with them. So much of eastern Europe has links to the former Soviet Union where there is a real problem with organized crime," says Farage.
Whether Latvia is fully ready for the switch remains to be seen. In any event, any financial institution doing business with the country should take special precautions to ensure that they are following all applicable legal guidelines.
