Customer due diligence is not a decision an obliged entity takes about a client. It is triggered by defined events and defined amounts, and each question that follows — how deep to go, who the beneficial owner is, what to do when the file cannot be completed — has its own answer in the statute.
Customer due diligence in Latvia is not something an obliged entity decides to do when taking on a client. It is triggered by defined events and defined amounts, several of which have nothing to do with onboarding at all — and two of the duties it generates run to the Enterprise Register and the Financial Intelligence Unit rather than to the client.
Three questions decide every file.
One: has a trigger fired
Due diligence is required before business relations begin, and before an occasional transaction in these cases:
| Trigger | Threshold |
|---|---|
| A transaction, or several apparently linked ones | EUR 15,000 |
| A funds transfer, including by card, e-money or mobile device | EUR 1,000 |
| Currency exchange | over EUR 1,500 |
| A crypto-asset transaction | EUR 1,000 |
| Goods or services paid in cash | EUR 10,000 |
| Lottery or gambling, including winnings and stakes | EUR 2,000 |
Two further triggers have no threshold at all: where suspicion arises, and where there is doubt that due diligence data already held are true or adequate. The second is the one most often overlooked, because it fires on an existing client whose file was closed long ago.
One extension is easy to miss. A real estate intermediary must carry out due diligence on the counterparty to the purchase, sale or lease — the person on the other side of its own client's transaction — before it is concluded.
Two: how deep
The Law sets a depth dial with three positions, and the risk assessment decides which applies.
Simplified due diligence is the position most often misunderstood. It is available only where a low risk exists that is consistent with the risk assessment, including the national one, and where the entity has taken measures to identify and understand the risks of its own activity and of the client. Those are preconditions, not descriptions.
What it permits is not omission. The entity still carries out the prescribed identification actions and applies the due diligence measures, in a scope corresponding to the nature of the relationship and the level of risk. Simplified means scaled, not skipped — and the scaling has to be defensible against the assessment that justified it. Two client types are named for it: Latvian state and municipal bodies characterised by low risk, and a merchant whose shares are admitted to a regulated market in a Member State.
A separate, service-based route exists and is narrow: every condition must be met — a written contract, payment through an account at a Member State credit institution, no suspicion, a total value not exceeding EUR 15,000, proceeds that cannot benefit third parties except on death or disability, and no possibility of conversion during the transaction or, where conversion is possible, proceeds realisable only after at least five years with no security, assignment or early termination.
Enhanced due diligence is risk-based rather than a fixed package. The Law lists measures of which one or more apply: additional information about the client and its beneficial owner, verified; information on whether transactions match the stated economic activity; the origin of funds and of wealth; the justification for transactions; senior management consent; and enhanced monitoring.
Politically exposed persons. Where the client or its beneficial owner is a politically exposed person, a family member or a known close associate, enhanced due diligence is mandatory: senior management must approve the relationship, source of funds and source of wealth must be established and documented, and monitoring is closer. The second limb is what catches people out — screening has to reach beneficial owners, not just the client.
The status does not lapse automatically. Measures can stop only once the person has been out of a prominent public function for at least twelve months and the relationship no longer presents higher risk; twelve months is a minimum, not an exit date. The Financial Intelligence Unit's guidelines set out how to identify prominent functions, including for foreign clients, and an entity's own list may not be narrower than the statutory one.
Three: beneficial ownership, and where to look
The entity must ascertain the beneficial owner and, on a risk basis, satisfy itself that the person ascertained really is that person, using a reliable and independent source.
The information required is specified: name, identity code, date of birth, nationality, country of residence, the proportion of shares held or controlled directly or indirectly, and the form of control exercised. Where control is indirect, the intermediary entity must also be identified.
On where to look the statute is directive. You start from the Latvian Enterprise Register, and then, based on risk, add one or more of: a statement confirmed by the client; Latvian or foreign information systems; or ascertaining the owner independently. The register is the starting point, not the answer.
The duty that catches people out
Where due diligence establishes beneficial ownership information that does not match the Enterprise Register, you must notify the Register — immediately, and no later than three working days — explaining the discrepancy.
What follows is quick. Within one working day, and without a separate decision, the Register enters a warning that the registered information may be untrue. It stays visible to other obliged entities, law enforcement and supervisors until withdrawn.
There is a safe harbour worth knowing before the question arises. A notification given in good faith is not a breach — whether or not the information turns out to be false, and whatever the contract with the client says. A confidentiality clause is not a reason to stay silent.
When the answer is not available
If no natural person can be found after all possible means have been used, the entity may treat the person holding office in the executive body as the beneficial owner — provided the steps taken are justified and documented. That is a fallback, not a shortcut, and the documentation is the whole of it.
If the file cannot be completed, the consequences are mandatory and immediate: do not establish the relationship, do not open the account, terminate existing relations without delay, and do not carry out the transaction. Each case is documented and assessed, and reported where suspicion arises.