OECD Praises Latvian Reforms, Doubts Enforcement

When it joined the OECD, Latvia’s government was lacking in strong legal practices. Since then, the small European nation has greatly improved its laws, at least on paper, including joining the Organization for Economic Cooperation and Development’s (OECD) anti-bribery convention in 2014. While the OECD was quick to praise Latvia for its reforms, it was equally quick to raise doubts about the country’s ability to actually enforce these new policies.

When it joined the OECD, Latvia’s government was lacking in strong legal practices. Since then, the small European nation has greatly improved its laws, at least on paper, including joining the Organization for Economic Cooperation and Development’s (OECD) anti-bribery convention in 2014. While the OECD was quick to praise Latvia for its reforms, it was equally quick to raise doubts about the country’s ability to actually enforce these new policies.

According to a story in the Wall Street Journal, the OECD’s anti-bribery working group issued a report on Latvia this week that praised the country for the “significant legislative steps” it has taken since joining the group. On the other hand, the report also noted the slow implementation of these reforms, leading to strong concerns about the government’s remaining weaknesses, inadequate criminal enforcement capacity, and the financial harms that could result to both Latvia and other nations thanks to its inability to effectively prevent money laundering through its economy. The OECD also expressed concerns about the risk of foreign bribery and other kinds of corruption.

In the past, the Latvia government has openly and defiantly criticized a Latvian anti-corruption agency, known as KNAB, and called for the director’s dismissal. In its report, the OECD pointed out that this type of conduct creates a perception among other nations that Latvia is corrupt and may interfere with the work of KNAB and any other person or organization if it believes there might be some benefit in doing so. In response, Latvia promised the OECD that it would not make any future such criticisms.

In addition, many feel that the Latvian government’s interference with KNAB has led to significant personnel issues in which a large swath of its senior investigators and staff left the organization between January 2014 and May 2015. This personnel rollover merely added to the OECD’s analysis of Latvia’s inability to fight its own corruption.

Although both Latvians and most in the world perceive Latvia as less corrupt than it was in the past, many Latvian companies appear easily influenced by foreign bribery and money laundering, the OECD reported. The report indicated that the bribery and other corruption issues appear to run from the highest to lowest levels of the Latvian government, making the nation an obvious target for those seeking to exploit its potential in less than honorable means.

Given its geographic location, the nation serves as a bridge of sorts between East and West. As such, it is ideally located for international banking. However, this opens the nation up to a substantial risk of money laundering. The significant perception of corruption mixed with its strategic location and status as a former Soviet satellite make it the perfect breeding ground for nefarious individuals and corporations around the world.

While Latvia’s recently enacted anti-corruption laws are a definite step in the right direction, the OECD significantly doubts the nation’s ability to enforce those rules. As such, they serve as little more than a signal of a desire among some for greater transparency and regulation, but a reminder of just how far Latvia has to go to make these rules anything more than aspirational.