Applying for an authorisation

Laws and regulations governing sanctions prohibit certain types of activities. For example, targeted financial sanctions prohibit, among other things, making funds available to sanctioned persons and impose an obligation to freeze the funds of sanctioned persons. Sectoral sanctions encompass various types of prohibitions, such as the export or import of certain goods or the provision of certain services to nationals or of a particular country or persons located in a particular country. The precise details of the activities prohibited by sanctions can be found in the specific law or regulation imposing the sanctions. The “Laws and Regulations” section provides information about the laws and regulations governing sanctions, including the European Union regulations that establish sanctions against Russia and Belarus.

Sanctions legislation can contain certain narrowly defined exemptions, whereby generally sanctioned activities may be performed with the authorisation from the competent authority. In all cases, except for those specified in Section 10(1.¹, 1.², and 1.³) of the Law on International Sanctions and National Sanctions of the Republic of Latvia, a person may submit a reasoned written application for an exemption authorisation to the FIU, so that the FIU can decide on whether to grant the exemption (i.e. issue the authorisation).

A reasoned written application for an authorisation may be submitted to the FIU by a sanctioned person or a person who wishes to perform a sanctioned activity. For example:

• a sanctioned person may request an authorisation to release frozen funds necessary to satisfy the basic needs of the sanctioned person;
• a person who wishes to perform an activity prohibited by sectoral sanctions may request an authorisation, for example, for the provision of a service or the export of goods.

The FIU may decide to grant exemptions only based on a reasoned written application. It is the responsibility of the applicant, i.e. the sanctioned person or the person who wishes to perform the sanctioned activity, to justify that the particular exemption covers the activity or transaction for which the authorisation is sought, as provided in the legislation applicable to the specific legal situation.

The Regulation of the Cabinet of Ministers No 184 “Procedures for the Proposition and Implementation of International and National Sanctions” (Cabinet Regulation) sets out the requirements for the minimum amount of information and documents that must be included in the application to the FIU, i.e.:

1. information on a transaction or activity for which the authorisation is requested;
2. information about the applicable sanctions legislation;
3. assessment of the compliance of the transaction with the relevant exemption determined in sanctions legislation;
4. information on the directly related transactions or activities necessary for the performance of the transaction or activity;
5. other information that may be necessary to take the decision on the admissibility of the application of exemption.

The assessment of the compliance of the transaction with the relevant exemption must clearly indicate the specific exemption on the basis of which the authorisation is sought. In the assessment, it must be demonstrated that the activity or transaction for which the authorisation is sought is within the scope of the exemption and that the activity or the transaction is strictly necessary to the given extent, taking into account the purpose and scope of the exemption.

The FAQ section offers examples of the information and documents that should be submitted when requesting an authorisation based on different types of exemptions.

It must be noted that the FIU has the right to request additional information or documents from the applicant or any other person, if it is necessary to assess whether an authorisation can be granted. Among other things, the FIU can request the following documents:

• a plan for future activities of a legal person developed in compliance with the restrictions laid down in laws and regulations governing sanctions and their objective;
• an assessment by an auditor or appraiser, for example, to demonstrate that a particular service and its amount is necessary and appropriate to satisfy the basic needs of a sanctioned person.

The FIU may define individual criteria that the application documents must fulfil. For example, if the sanctioned person owns real estate, then in order to assess the normal maintenance costs of the frozen real estate, the FIU may request an evaluation by an independent, competent, certified appraiser to be submitted, that provides a sufficiently detailed assessment based on recognised valuation techniques, of the necessary expenses and their amounts, considering the actual circumstances and the plan of the sanctioned person for future activities.

Section 10 of the Cabinet Regulation specifies that the basic needs expenses of a sanctioned person or its dependant immediate family members are only those expenses that are necessary to ensure daily living, domestic activities, and state of health of a subject of sanctions and his or her dependent family members, as well as the minimum existence of a subject of sanctions which is a legal person.

When applying for an authorisation in relation to basic needs, the sanctioned person must provide proof that:

• the expenses are strictly necessary for the purposes specified in Section 10 of the Cabinet Regulation;
• the expenses are strictly necessary and justified by the individual circumstances of the sanctioned person;
• the amount of the expenses is not based solely on the sanctioned person’s assessment of amount of expenses that was necessary to meet their basic needs before the implementation of the sanctions;
• for sanctioned legal entity, the expenses are justified and strictly necessary, considering the sanctioned legal entity’s plan for future activities.

For example, a person’s luxury lifestyle prior to the imposition of the sanctions does not constitute grounds for requesting a basic needs-based authorisation for the use of frozen funds to cover luxury lifestyle expenses that do not serve the purpose of fulfilling basic needs. Similarly, for example, the number of employees hired or the size of the premises leased by a sanctioned legal entity before the implementation of sanctions does not constitute grounds for allowing the same number of employees or the same size of premises to continue to be hired or leased when applying for a basic needs exemption, considering that sanctions, by their nature, do not allow the continuation of normal economic activity.

Persons are encouraged to apply for the authorisation as early as possible. In general, the FIU reviews an application for an authorisation within 1 month after it is received.

If the application does not contain the information or documents necessary for the assessment of the applicability of the exemption on the merits of the matter, the FIU will not be able to make a decision on whether to grant the exemption. Furthermore, the FIU will not be able to review the merits of an application if it does not contain the minimum amount of information or documents required by the Cabinet Regulation. In such a situation, the FIU will inform the applicant of the deficiencies in the application that need to be rectified in order to enable the FIU to review the application on its merits.

In accordance with the procedure set out in the Administrative Procedure Law, the FIU may extend the review of the application to up to four months starting from the date of the receipt of the application, informing the applicant of this fact.

If a person has an objective need to obtain the authorisation urgently, they may request the FIU to process the application within a shorter period, stating the objective circumstances explaining the urgency. The FIU may take such a request into account.

According to Section 10(1.³) of the Law on International Sanctions and National Sanctions of the Republic of Latvia, in special matters related to national security, the decision on whether to grant a sanctions exemption is made by the Cabinet of Ministers, based on the suggestion by the FIU and the proposal by the Minister of Foreign Affairs. The decision on whether a certain matter is considered to be of special relevance to national security is made by the FIU. Therefore, in any case, persons must submit a reasoned written application to the FIU, following the same procedures and requirements as those for the exemptions set by laws and regulations governing sanctions.

The Cabinet of Ministers takes a decision within 3 months after receiving the application. If the deadline cannot be met for objective reasons, the Cabinet of Ministers may extend it, to a period of no more than 6 months after the date of receipt of the application, informing the applicant of this fact.

The FIU’s decision to grant or deny an authorisation is an administrative act and it is addressed to the person who applied for the authorisation.

The authorisation issued by the FIU establishes rights for the recipient of the authorisation. The FIU’s authorisation does not impose an obligation on third parties to perform actions that may be necessary for the authorisation holder execute the authorised activities.

The recipient of the authorisation submits the authorisation to other parties that need to verify that the activity in question has been authorised by the FIU. For example, in order for the sanctioned person to make a payment based on the FIU’s authorisation to release frozen funds, the sanctioned person submits the issued authorisation to the credit institution and ensures that the authorisation is also available to the other transaction party and the credit institution of the other transaction party. The FIU cannot impose an obligation on the credit institution to execute the payment.

The laws and regulations governing sanctions provide that, after assessing the permissibility of granting exemption, the FIU may decide to issue an exemption authorisation to engage in a particular activity under such conditions as the FIU deems appropriate. Therefore, with regard to the exemptions specified in the sanctions legislation, the FIU has the discretion to decide whether to grant an authorisation as well as to set additional conditions that need to be met, in order for the FIU to make a decision on whether granting an exemption is permissible.

The FIU is not required to issue an authorisation even if the application for the authorisation technically meets the conditions specified in the laws and regulations governing sanctions.

A decision made by the FIU to grant or deny an authorisation may be appealed, by submitting an application to the Head of the FIU. The decision of the Head of the FIU may be appealed to a court in accordance with the Administrative Procedure Law.