OECD: Latvia’s anti-corruption progress hampered by enforcement weaknesses

21 Oct 15

Latvia’s progress in its fight against foreign bribery is “overshadowed” by enforcement weaknesses in the country’s anti-corruption agency, the OECD has said.

The findings were published in a report by the OECD Working Group on Bribery. The report marks the group’s second assessment of Latvia’s implementation of anti-foreign bribery procedures since it acceded to the OECD Anti-Bribery Convention in 2014. The convention establishes standards to criminalise bribery of foreign public officials in international business transactions.

The report stated that, while a number of positive developments have been made in a short space of time, these are undermined by uncertainty regarding the capacity of the KNAB  – Latvia’s anti-corruption law enforcement agency ‒ to enforce legislation.

It noted “serious personnel issues” had interfered with the agency’s ability to investigate allegations of foreign bribery, as well as related money laundering and false accounting allegations.

In addition to lax enforcement, the report stated that weak regulation is increasing the likelihood of the proceeds of foreign bribery being laundered through Latvian banks by non-residents.

Of Latvia’s 20 banks, 14 specialise in foreign clients whose deposits are equivalent to 40% of Latvia’s GDP. A large portion of these originate from the Commonwealth of Independent States in Eastern Europe and Central Asia ‒ around 80%, estimates Latvia’s financial regulator the Financial and Capital Market Commission.

The report cited recent incidences of alleged large-scale money laundering that went undetected by existing measures but were later reported in the media.

According to an independent report from financial investigators Kroll, around $1bn recently stolen from Moldova was allegedly laundered through Latvian banks.

The OECD report also noted “negative government commentary” regarding the KNAB risked creating the perception of political interference in the agency’s work.

However it acknowledged a number of positive developments, including legislative reforms in accordance with the anti-bribery convention and awareness-raising efforts in the public and private sectors.

The working group made a number of suggestions to improve Latvia’s efforts to fight foreign bribery. These included a fully functional KNAB that is not subject to improper government criticism and comprehensive protections for public and private sector whistleblowers.


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