Certain Latvian banks refuse lately to make transfers and withhold their clients` money, justifying it by fulfilling the requirements of the law “Law on the Prevention of Money Laundering and Terrorism Financing”, hereinafter referred to as the Law.
In order to assess the validity of the actions of banks, it is necessary to understand the legal regulation of this issue.
As per the Section 32 of the Law, the bank is entitled to make a decision to refrain from executing a transaction (i.e. to refrain, among other things, from transferring the money) if:
- the transaction is related with or there are reasonable suspicions that it is related with money laundering or terrorism financing, or
- there are reasonable suspicions that the funds are directly or indirectly obtained as a result of a criminal offence or are related with terrorism financing, or an attempt of such criminal offence.
The bank shall, without delay, but not later than on the following working day, notify the Office for Prevention of Laundering of Proceeds Derived from Criminal Activity (hereinafter referred to as the Control Service) of refraining from executing a transaction.
When refraining from executing a transaction, the bank shall not carry out any actions with the funds involved in the transaction until receipt of an order of the Control Service to terminate the refraining from executing a transaction.
Depending on the order of the Control Service the bank either shall stop refraining from executing a transaction or freeze the assets.
The Control Service shall, not later than within five working days, but, if additional information needs to be requested, within eight working days, after receipt of the report of the bank on the refraining from executing a transaction, assess the situation and shall issue one of the following orders:
- to terminate the refraining from executing a transaction or
- to carry out temporary freezing of funds.
The Control Service shall inform the bank about its order to carry out temporary freezing of funds, whereas bank, in its turn, shall inform the customer sending him a copy of such order.
A bank customer whose funds are frozen is entitled to appeal the order of the Control Service within 30 days from when he received a copy of the order on temporary freezing of funds, to a specifically authorized prosecutor.
Also, the client of the bank is entitled to provide the bank with substantiated information on the origin of the funds, whereas the bank, in its turn, shall immediately transfer this information to the Control Service for review.
The Control Service at any time is entitled to cancel its order to freeze funds.
If the Control Service has issued an order on temporary freezing of funds on the basis of the bank’s report on the refraining from executing a transaction, then the Control Service shall compile and analyse the obtained information and not later than within 40 days after receipt of the bank’s report on the refraining from executing a transaction shall carry out one of the following actions:
1) issue an order on freezing of funds for a certain period of time if:
- money is considered proceeds of crime pursuant to the Law. In such case the funds shall be frozen for a period of time up to six months;
- on the basis of the information at the disposal of the Control Service, there are suspicions that a criminal offence is being committed or has been committed, including money laundering or an attempt of such criminal offence. In such case the funds shall be frozen for a period of time up to 45 days;
2) provide a written notification to the bank that further temporary freezing of funds shall be terminated;
3) issues an order to extend the period of freezing of funds for an additional period of up to 40 days, established by the Prosecutor General or an authorized prosecutor, and then carries out one of the above actions. If the order on freezing of funds for a certain time period has not been revoked, the Control Service shall, within 10 working days after its issuing, provide information to the pre-trial investigating institutions. Further fate of frozen funds in this case will be decided in accordance with the rules of criminal and criminal procedure law.
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