As CEO and founder of COREDO, I see daily how entrepreneurs from Europe, Asia and the CIS face the challenges of international expansion. Over nine years of our practice the COREDO team supports clients at all stages – from company registration in the EU, including Latvia, the Czech Republic, Cyprus and Estonia, to obtaining financial licenses in Singapore and Dubai, as well as implementing AML systems. Today I will analyze the bank-centric AML model in Latvia, explain why it dominates regulation, and show how your business can effectively scale under it, relying on real cases from our experience.
AML in Latvia: Why bank-centric?
This bank-centric AML model in Latvia focuses on systemically important financial institutions (SIFI), requiring them to hold increased capital buffers and enhanced monitoring. COREDO’s practice confirms: banks here act as the “gateways” for all transactions, performing CDD/EDD, PEP monitoring and sanctions screenings for corporate clients from the EU, Asia and the CIS.
The solution developed at COREDO for an Asian fintech startup illustrates the essence. The client planned payment services through a Latvian bank: we integrated RegTech solutions with machine learning to automate AML/KYC, which reduced verification time by 40%. AML regulation in Latvia emphasizes the role of banks — they are required to calculate a systemic risk surcharge (Systemic Risk Buffer), which can reach 3-5% of capital for large players, increasing the focus on concentration of credit risk.
Bank-centric model: risks and opportunities for business
The model increases the systemic importance of banks, where the N30 standard limits loan concentration to a single borrower to 30% of capital. This directly affects financing: for companies from the CIS seeking loans in the EU, banks introduce differentiated AML requirements, increasing scrutiny for cross-border transactions. Our experience at COREDO showed: one client from Singapore, registering a holding in Latvia, faced delays due to bank liquidity in Latvia — the liquidity buffer (LAT, Liquidity Coverage Ratio) forced the bank to require additional liquid assets.
The COREDO team helped an Estonian client with a crypto license pass an audit by implementing strategic AML risk management strategies. Result: ROI from compliance exceeded 25% due to reduced fines and faster client onboarding. The advantages of bank-centric AML for companies in the EU, in terms of scalability: Latvian banks offer ready-made tools for cross-border AML for EU-Asia business, including automated PEP monitoring.
Comparing with other EU countries, the bank-centricity of AML in Latvia stands out due to sector consolidation — since 2019, 4-5 large banks have dominated, which simplifies partnerships but increases dependency. Comparing Latvia’s bank-centric AML with other EU countries shows: unlike decentralized Lithuania, Latvia focuses on the banking sector under the FCMC, where systemic risk surcharges protect against crises but make loans 1-2% more expensive.
| Aspect | Latvia (bank-centric) | Lithuania (decentralized) | Cyprus (hybrid) |
|---|---|---|---|
| Supervisory focus | Banks as SIFIs, N30 up to 30% | Fintech and EMI | Banks + investment firms |
| KYC time | 3-7 days for SMBs | 1-3 days | 5-10 days |
| Capital buffers | +3-5% Systemic Risk Buffer | Standard | Based on substance |
| Impact on ROI | +20% from RegTech | High speed but risks | Benefits for holdings |
The table reflects data from COREDO’s practice: for Asian firms, Latvia is preferable for stability, despite the risks of implementing AML in Latvian banks for entrepreneurs.
Scaling AML to a bank-centric approach
How does the bank-centric AML model affect business in Latvia for firms from the CIS and Asia? It requires scalability of AML systems for SMBs but opens access to funding. Strategies for scaling a business under bank-centric AML in Latvia include:
- Integrating RegTech: RegTech solutions for AML in Latvia with ML reduce costs by 30-50%. At COREDO we deployed such a system for a Cyprus-based payment company, providing CDD/EDD in a bank-centric approach and sanctions screenings of Latvian banks.
- Liquidity management: Liquid assets LAT AML: key to approval. A client from Dubai opening a branch used our liquidity buffer calculation model, increasing the ROE of banks to 12%.
- Audit and reporting: Avoid the risks of falsifying reports through financial audits and compliance reporting. COREDO’s practice confirms: transparency of retail clients’ liabilities in AML accelerates lending.
How is the systemic risk surcharge calculated in AML in Latvia? The FCMC assesses based on assets, interconnectedness and complexity: for banks with >10% market share – +2-5%. This affects how the N30 rule impacts lending in Latvian banks, limiting concentration of credit risk while increasing resilience.
ROI from compliance with bank-centric AML in Latvian banks reaches 15-30% due to reduced fines (up to €5 mln under EU AMLD6) and access to the EU market. Is it worth investing in RegTech to overcome the bank-centric nature of AML in Latvia from an ROI perspective? Absolutely, if your turnover >€1 mln – payback in 12-18 months.
COREDO cases: registration and licenses
Our experience covers 200+ projects. For a Slovak manufacturer expanding into Asia, the COREDO team registered a company in Latvia with a bank account, implementing bank-centric AML. We overcame the N30 regulation by diversifying loans and obtained a payment license; the business grew by 150% in a year.
Another case: a Singapore trader with a forex license. Latvian bank AML required EDD for CIS partners; COREDO’s solution using machine learning in bank AML provided corporate lending funding without delays. Long-term consequences of bank-centric AML regulation for firms in Asia and the CIS: ROE growth of 10-15% with proper compliance.
Does banks’ liquidity cushion affect the return on investment in AML services? Yes, but managing systemic risks through differentiated buffers increases resilience. How does consolidation of the Latvian banking sector change risk management strategies for AML? It simplifies partnerships with top banks, reducing bank-centric risks for SMB.
Answers to key business questions
- Why does a bank-centric AML model in Latvia increase systemic risks for businesses? Because of dependence on 4-5 banks, although systemic importance add-ons minimize them.
- How do systemic importance add-ons affect lending ROI in Latvian banks? They increase costs by 1%, but RegTech provides +20% returns.
- What are the strategic drawbacks of bank-centric AML for scaling CIS companies in Latvia? KYC delays, solvable by implementing scalable AML processes.
- Is bank-centric AML in Latvia a barrier to entry for Asian firms? No, if you use banks’ liquidity cushions and local substance.
- How to calculate long-term compliance costs? Formula: (RegTech costs + Audit) / (Fine reduction + New turnover): at COREDO we model for your case.
- Which return on equity metrics show AML effectiveness? ROE >10% with N30 <25%.
Bank-centric AML in Latvia is not a barrier but a tool for reliable growth. At COREDO we turn regulatory challenges into competitive advantages, accompanying you from registration to licenses. Contact us – we’ll discuss your strategy personally.