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12.06.2020

Who must submit a threshold declaration?

Mothly issue iFinases published an article by PRIMUS DERLING Associates Igors Dambrāns and Kristīna Markeviča on threshold declaration (in context of Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing) – cases, content and procedures for submission.

The article will deal with the subjects, cases and the modalities and content of the submission of the threshold declaration. The threshold declaration is a relatively new instrument in force since the end of 2019, which obliges reporting obligations to the large number of entities. Information is provided to the Financial Intelligence Service (hereinafter as FIS). It is used to carry out strategic analysis as well as the processing and analysis of transactions at the disposal of the FIS whereas the global objective is to combat money laundering and the financing of terrorism and proliferations.

Since 17.December 2019 Law on the Prevention of Money Laundering and Terrorism and Proliferation Financing (hereinafter as the Law) determines the obligation to submit a threshold declaration to the Financial Intelligence Service in the cases specified by the subjects established in the Law. The declaration must be prepared and submitted in accordance with the 27.August 2019 Cabinet regulations No. 407 “Provisions regarding the procedure and content of submission of the threshold declaration” (hereinafter as the Cabinet regulation).
It must therefore be determined from the outset whether the economic or professional operator concerned classifies as one under Article 3.
Although in general, the obligation to provide threshold declarations has been imposed on all entities of the Law, in reality the inventory of reporting cases as defined in paragraph 5 of the Cabinet regulation is consistently relevant for only a few categories of entities. The most common case, which could be current for all entities of the Law, is a client cash transaction of at least EUR 7 000.

Cases where individual entities of the Law have an obligation to submit a threshold declaration to the Financial Intelligence Service:

  • all entities in so far as they provide services related to cash transactions where the size of one cash transaction is equivalent to at least EUR 7 000 or cross-border payments where the amount of one cross-border payment is equivalent to at least EUR 500 000;
  • insurance operators and intermediaries, in so far as they carry out or provide life insurance or other funds-related insurance services, where the amount of insurance reimbursement or repurchases paid is equivalent to at least EUR 100 000;
  • private pension funds in so far as the amount of supplementary pension capital paid is equivalent to at least EUR 100 000;
  • capital companies and credit institutions engaged in the purchase and sale of foreign currency cash in so far as the transaction in which the client buys or sells foreign currency in cash is equivalent to at least EUR 5 000;
  • lotteries and gambling operators, in so far as the size of one transaction is equivalent to at least EUR 2 000, in which the customer is awarded winnings or settled with the customer, and where the client buys, sells or changes the means of participation or changes the currency for that purpose, supplements the interactive gambling and interactive drawing account or removes funds from it at least EUR 2 000;
  • persons engaged in the circulation of arts and antiques in so far as the size of the transaction is equivalent to at least EUR 50 000.
    When determining cases which impose an obligation to report, subjects of the Law shall submit a threshold declaration to the Financial Intelligence Service once a week for each transaction conducted during the previous period between the subject of the Law and his or her client.
    The threshold declaration shall be submitted electronically, using the Financial Intelligence Service website (https://zinojumi.fid.gov.lv ) for the subject of the Law and filling out the form attached in the Annex to the Cabinet regulation. The threshold declaration must contain minimum information on the transaction, including the counterparty and the amount. In order to properly classify the content of the transaction, the subject of the Law must use special codes which help, for example, to understand the role of the participant in the transaction (official, owner, guarantor, spouse, etc.), a sign of the threshold statement (why the declaration is made), etc.

It is important to remember that the FIS does not have the right to disclose the data of the persons submitting the threshold declaration. Primarily, the information contained in the threshold statements is used for strategic analysis. However, in the cases provided for in the Law, the FIS has an obligation to issue the information at its disposal at the request of operational bodies, investigative bodies or prosecutors in operational or criminal proceedings, as well as at the request of a court in criminal proceedings. The subject of the Law itself is also obliged to register the threshold declaration submitted to the FIS and to ensure that it is made available to the supervisory and control authorities at the latest on the next working day.
The obligation to submit the threshold declaration shall not apply to tax advisers, outsourcing accountants, sworn auditors, commercial companies of sworn auditors, sworn notaries, sworn lawyers and other independent legal service providers in cases where they defend or represent clients in pre-trial criminal proceedings or judicial proceedings or advise on the initiation or avoidance of proceedings (except criminal proceedings). the prevention of money laundering and terrorism and proliferation financing).

Each subject of the Law should complement the policies and procedures of its internal control system with the obligation to provide the Financial Intelligence Service with threshold declarations, describing the procedures and content for submitting them.
It should be noted that both the scope of the law’s subjects and the cases of the submission of doorstep declarations may have been modified by the legislator, and the amendments to the Law and the Cabinet regulation should therefore be followed.

Full article in latvian available here