Destiny of shell-company in Latvia from 2018

The ready-made company also called shelf company or shell company, previously formed company, seasoned company or aged company describes limited liability company or partnership are feeling threatened by Latvian Law in 2018.
Each bank started to extensively evaluate the risk profile of its customers and independently decides on the possibility of further cooperation before new regulation comes to action when Latvian Government decided to make amendments in Law. At the beginning of 2018, Latvian banks had 17 107 shell companies as clients (clients of ABLV Bank are not included). According to the Financial and Capital Market Commission, 32% of all shell companies in Latvian banks are registered in the United Kingdom.

Amendments (26.04.2018) to the Law on Prevention of Laundering of Proceeds from Crime and on the Financing of Terrorism came to action on 09.05.2018.

The law provides three characteristics for shell companies. According to the Law, a legal entity is shell formation if it has at least one or more of the three characteristics.

1. There is no legal relationship with the actual economic activity and the activity of the legal entity is small or does not constitute an economic value and the entity of the law does not possess documentary information proving the opposite. 
2. In the country in which the legal entity is registered, the regulatory enactments do not require the preparation and submission of financial statements, including annual financial statements, for their activities to the relevant national supervisory authorities. 
3. the legal person has no place of business in the country in which the legal entity is registered.

Cooperation with shell companies will have to be stopped by about 20,000 Latvian companies, said Daiga Kiopa, Board Member of SIA Lursoft. The most difficult thing is to find out the first indication - whether the company carries out a real economic activity.

The purpose of the ban on shell companies is to ensure that the financial sector in Latvia is stable, sustainable, safe, and also offers services that support the economy rather than create risks.