What are sanctions
Sanctions are restrictions imposed on a subject of sanctions in accordance with the laws and regulations. Sanctions are imposed by an international organisation or by a state on a state, territory, legal or natural persons or other identifiable subjects.
Purpose of sanctions
Sanctions aim to restore international peace and security and to change the behaviour of the subject of sanctions in order to achieve the objective of the sanctions. The purpose of sanctions is to restore the rule of law, to prevent any potential deterioration of the situation, as well as to put an end to the unlawful conduct of the subject of sanctions.
In accordance with the legal framework on sanctions, an institution supervised by Latvijas Banka must comply with:
- national sanctions;
- international sanctions imposed by organisations to which Latvia is a member,
- restrictions specified by sanctions imposed by the North Atlantic Treaty Organisation (NATO) and a Member State of the European Union, which significantly affect the interests of the financial and capital market.
The institutions supervised by Latvijas Banka are directly subject to financial restrictions, i.e. restrictions on financial instruments and financial resources which are under the ownership, possession, holding or control of the subject of sanctions, including restrictions on providing financial services to the subject of sanctions.
With regard to other types of sanctions and compliance with them, the institutions supervised by Latvijas Banka must ensure that the restrictions are complied with in accordance with the scope specified by the legislation laying down the sanctions, and must assess their impact on the fulfilment of the task of compliance with financial restrictions, i.e. it may be useful to assess not only financial restrictions but also other types of sanctions. This can also help to assess and identify situations of circumvention of financial restrictions.
General information on sanctions, including their types and enforcement, listing of sanction databases and other detailed information can be found in the Sanctions section of the Ministry of Foreign Affairs website.
A more detailed explanation and examples of sanctions and their application can be found on the website of the Financial Intelligence Unit.
Latvijas Banka's competence and permits issued, general consent
Pursuant to the amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia that came into force on 1 April 2024, Latvijas Banka transfers its competence in applying exemptions in financial restrictions to the Financial Intelligence Unit of Latvia. Accordingly, as of 1 April 2024 and in line with Section 10, Paragraph one of the Law on International Sanctions and National Sanctions of the Republic of Latvia, the subject of sanctions or the person who wishes to perform activities covered by the international or national sanctions submits the application to receive the permit for applying an exemption to the Financial Intelligence Unit of Latvia. Consequently, Latvijas Banka will no longer issue permits and all applications related to the application of restrictive measures will be transferred to the Financial Intelligence Unit of Latvia or left untransferred if the application to receive the permit is submitted by a financial market participant on behalf of a third party.
In addition, Latvijas Banka will continue to supervise financial market participants with regard to the establishment and control of an internal control system for the sanctions risk management.
Pursuant to the requirements of the Regulation on the Sanctions Risk Management, Latvijas Banka could, until 1 January 2024, grant the participants of Latvia's financial market general consent, thus enabling the financial market participants referred to in Paragraph 1 of this Regulation and having received a relevant application for a financial transaction to provide financial services and execute financial transactions without a separate permit from Latvijas Banka with regard to persons subject to financial restrictions according to the framework for sanctions in force in a Member State of the European Union or North Atlantic Treaty Organization which were necessary to cover the basic needs of such natural persons and their dependent family members or to ensure the basic economic activity of legal persons.
Pursuant to Paragraph 8 of the Transitional Provisions of the Law on International Sanctions and National Sanctions of the Republic of Latvia, the permits issued by Latvijas Banka and the Financial and Capital Market Commission for the execution of financial transactions remain valid until Latvijas Banka revokes them but no longer than until 31 December 2024. This means that all unlimited or unused permits issued by Latvijas Banka and the Financial and Capital Market Commission, including general consent given on 27 July 2022 and temporary permits with the validity period beyond 1 April 2024, remain in force until their validity period expires or they are revoked but no longer than until 31 December 2024.
General consent refers both to making and receiving payments.
General consent refers to payments applied for by certain subjects of sanctions.