Did you know that, very soon, Latvian banks will stop opening accounts for their customers? Latvian companies with foreign capital were wary, and not by chance. Indeed, financial institutions in the country refuse to provide services to customers with a high degree of risk. What are the situations in which banks usually close their customer accounts, denying him service?
We have identified 7 reasons why banks may refuse to provide services to customers and consider further cooperation with him impossible.
Reason №1 - the bank requests additional information, but the client refuses to provide it. This usually implies data on the business model, transactions, beneficiaries or partners. If the information provided is misleading, or if it is not provided at all, the probability of working with such a company goes to zero.
Reason №2 is the overly complex organizational structure of the company. Banks believe (and not unfoundedly) that such a structure is often used by companies in order to hide real owners. For this purpose, firms are often registered in countries with preferential taxation. If not so long ago, many financial organizations preferred simply not to notice it, today, the law obliges them to know the beneficiaries of the client company.
Often, banks ask the company representative who is the beneficiary of the business, to which they do not receive any answers. Sometimes, representatives openly state that they are not up to date and do not know who is the owner of the business. Nowadays, all banks are required to obtain information about who the company's shareholders are. If the company refuses to provide such information, further service will be denied.
Reason №3 is the very complex structure of transactions conducted by the company. This implies situations when an institution is involved in a difficult structure of transactions and mutual loans with related enterprises of the holding, in which there is practically no economic essence. Or, for example, a Latvian company sells a product to Estonia, but funds for the product come from somewhere else, for example, another company.
Reason №4 is the lack of customer connection with Latvia. Latvia is used exclusively as a payment center.. Example - a supplier from the Ukraine organizes the delivery of goods to China, and the payment itself passes through Latvia.
Such an operation is incredibly difficult even for the most experienced bankers, increasing the degree of their tension. Indeed, it is not so easy to understand the true nature of this transaction, in particular, the logic of transferring funds through Latvia. The likelihood that financial institutions in Latvia will agree to make payments is close to zero. Banks simply refuse to serve such customers and to conduct their transactions. After all, agreeing to enter such a deal means taking on obligations to track it, and all this is fraught with serious costs for banks, which, in most cases, simply do not pay off.
Reason №5 - beneficiaries are non-residents from a country that is classified as a high risk of corruption. This does not mean that banks refuse to work with non-residents. If a non-resident does not live in Latvia, but at the same time wants to acquire a property for speculative operations, the bank will refuse to provide him with his services.
In this case, we can certainly say we are dealing with money laundering and corruption. You can try to prove that this is not the case, but the banks are still unlikely to serve you. It would be much easier for them to immediately refuse to provide such services.
Reason №6 - the company has connections with political figures associated with increased corruption risks. We believe the reason for a refusal is quite clear here.
And, finally, the seventh good reason why Latvian banks may refuse to provide customer service is the company's connection with persons who are on a sanction list or are the leaders of such a company. There are a huge number of nuances, because sanctions cover not only individual companies or people, but also entire industries.
So, before entering into a cooperation agreement with someone, it would be good for companies to find out if their potential partner is on the list of people / businesses that have been sanctioned.
