RIGA, April 26 (Xinhua) -- Latvia Thursday passed amendments to its anti-money laundering law, banning Latvian-registered banks from doing business with so-called shell companies.
The amendments to the law on the prevention of money laundering and terrorism financing were passed in a fast-track procedure. Fifty-seven parliament members voted for the initiative, while 17 voted against it and four abstained.
Voting against the new legislation were parliament members from the opposition left-wing Harmony party, warned that the ban would destroy nonresident banking business in Latvia.
The amended law defined shell companies as firms that cannot prove their involvement in any real commercial activity, firms registered in countries where they are not required to file financial reports, and companies that have no place for doing their business.
Latvian-registered banks have 14 days to notify their clients that meet the description that their contracts with banks are being terminated as well as their bank accounts have to be closed in 60 days.
The shell company ban will also apply to payment institutions, electronic money institutions, investment brokerages, as well as asset management companies.
The amendments to the anti-money laundering law were drawn up to prevent the Latvian financial system from being used for laundering illicit proceeds through the Baltic country's credit institutions.
Latvian Prime Minister Maris Kucinskis said earlier this month that shell companies made up around 60 percent of the Latvian banks' clients only a few years ago. Since the government started considering a ban on shell companies earlier this year, the latest statistics showed that the figure has dropped below 30 percent.
The prime minister also admitted that giving up the shell company business would affect the banks' performance results and the Latvian economy in general. The macroeconomic impact from the ban is projected at 0.5 percent of Latvia's gross domestic product.
Meanwhile, entrepreneurs from various sectors of the Latvian economy have warned that the ban on shell companies might also hurt law-abiding business people.