I. Znotiņa: “Effective cooperation and the use of modern technologies are critical for prevention of financial crime”

To promote the use of innovative technologies and cooperation between different law enforcement authorities in the prevention of financial and economic crimes, the first AML Innovation Hub in the Baltics has been launched in Riga.

On 30 March, the opening discussion "Cooperation and Innovation – The Next Step for National and Global Security” took place with the law enforcement authorities and other stakeholders, discussing the development of more efficient cooperation including use of innovative technologies and artificial intelligence solutions for the prevention of financial crimes. Participants of the discussion also learned about the experience of other countries operating similar initiatives.

"The opening of the Anti-Money Laundering Innovation Hub is a significant moment not only for the home affairs sector and law enforcement authorities in Latvia, but also for Europe. I have heard many times in various international formats about the great achievements of Latvia in its fight against money laundering. It has been hard work and a journey with many challenges. The aim of the Innovation Hub is to enhance cooperation and develop our capabilities, focusing on the application of the latest technologies for financial intelligence purposes. While developing the Innovation Hub, it will be very important to work together and find a common language with all the involved participants, not only in Latvia but also in the entire region. The goals set are high, and I hope that the Financial Intelligence Unit will succeed in achieving them”, Marija Golubeva, Minister for the Interior, said at the Hub’s opening event.

“Data-driven cooperation between various domestic and international institutions, enabled by the use of modern technology, is a critical prerequisite for the detection and prevention of financial crimes. We see them becoming increasingly complex and internationally entangled. Criminals take advantage of the lack of capacity in the supervisory systems of different countries to generate and use their illicit proceeds to commit fraud. Furthermore, crimes are committed with equal activity both in the physical and in the virtual world. That is why it is very important to develop secure and innovative, including digital, information exchange channels and cooperation platforms", says Ms Ilze Znotiņa, Chief of the Financial Intelligence Unit.

Znotiņa stresses that in the new geopolitical reality, the successful fight against the proceeds of crime must also be used to prevent violations of the sanction regime, thereby strengthening national and global security.

"The Innovation Hub will significantly strengthen cooperation between public authorities, both locally and internationally, and grow the cyber muscles of law enforcement and supervisory authorities. Today, the need for digitalisation is very significant. Not only because crime is becoming digital, but also because many systems are not designed to exchange information securely. Our vision is to become the central AML (anti-money laundering) Innovation Hub in the Baltic Sea Region. The tragic events in Ukraine remind us all once again of the importance of close and effective cooperation. Cooperation for a common goal – security of our country and our citizens", says I. Znotiņa.

Zane Petre, Head of the European Commission Representation in Latvia: "This is one of the first projects funded from the Recovery and Resilience Facility offered by the European Commission and it is a significant contribution to strengthen security of both Latvia and the EU. Strengthening digital capacity and promoting sustainability are long-term priorities for the European Union. During the period, when the world is becoming increasingly connected thanks to technologies and globalisation, security threats of all kinds are on the rise and require a high level of expertise, innovative approach to problem solving and a network of contacts to successfully fight the crime. The new Hub will enable Latvia to lead the way and be a supporting point for other Member States of the European Union in the fight against crime."

AMLIH is co-funded by the European Commission. The main function of the Hub will be to serve as a platform for secure and effective cooperation between various Latvian and foreign law enforcement authorities and data centres in the AML field. Thanks to innovative technologies, the Hub will be able to provide secure communication and data exchange channels between the relevant authorities, thus increasing the efficiency of investigation and crime combating. The experience of other countries shows that such centres of cooperation and the ability to exchange data in a secure way support authorities in establishing a stronger strategic data analysis capacity.

Compared to similar initiatives in other countries, AMLIH will also have an important additional function of networking with various local and international institutions of higher education and research centres in order to promote scientific studies in the field of finance. Furthermore, an "AML sandbox" is planned in AMLIH for private sector participants to help them find the simplest and most efficient ways to ensure compliance with the AML requirements in their businesses.

The main functions of AMLIH are:

• To improve inter-institutional cooperation at both national and cross-border level.
• To promote the use of innovative technologies and artificial intelligence to prevent financial crime.
• To develop strategic analysis and conduct scientific studies on financial security, potential risks and their impact on the national economy and society.

The new Hub will start its work in phases. The first phase will involve networking with local and foreign law enforcement authorities in the areas of intelligence, operational prevention and combating, as well as networking in financial research. But the further stages will involve installation of new technological equipment.

Key conclusions arising from the discussion:

• Since the “overhaul” of financial sector, there has been a huge leap in law enforcement cooperation. Establishment of the AMLIH Hub is a logical step to further promote cooperation and work more efficiently.
• International criminal groups have developed a high level of technological prowess, making it increasingly difficult for countries to trace the flow of criminal proceeds. Successful operation of AMLIH will reduce the distance between criminals and law enforcement authorities.
• Russia's war in Ukraine shows that the fight against money laundering is a matter of national and global security, because war is financed by funds obtained by criminal means. Many European countries now need to learn from Latvia, because the war highlights the unfinished business of various countries just like through a magnifying glass.
• Latvia's law enforcement authorities have become part of the broader Latvian national defense effort – the more successful is imposition of sanctions, the greater reduction in funding for the war will be.
• For the Innovation Hub to work effectively and for law enforcement authorities to exchange information, a data sharing system will need to be developed to balance the right to privacy and data with the public interest.
• Decisions taken by law enforcement authorities, which often involve deprivation of liberty or confiscation of property, must be based on high quality data and transparent rules to avoid unjustified restrictions on citizens and to increase public trust in public authorities.
• Involvement of the private sector – banks, financial institutions – is also important in the fight against financial crimes, as these institutions often hold vital information.
• Education and awareness-raising in society is also very significant to reduce financial crime and shadow economy, because involvement in financial crime, tax evasion or buying of services and goods from companies that do not issue receipts is also a personal choice and responsibility of each individual.
• In the coming months, Russian and Belarusian nationals who have made a fortune through crime will try to transfer their funds to other countries, possibly also via the Baltics. Latvian law enforcement authorities must therefore be prepared to prevent such attempts.