Since Russia’s invasion of Ukraine, the number of companies whose owners or ultimate beneficiaries have changed their declared citizenship from Russian or Belarusian has risen sharply. The most common new nationalities are Israeli, Latvian and that of Antigua and Barbuda, according to Latvian Radio.
Experts cite two main reasons for the trend: an effort to avoid financing Russia’s war effort, and attempts to steer clear of international sanctions.
Significant amendments to Latvia’s law on liability for breaching international sanctions came into force last June. Sanctions have since become tougher, with responsibility extending to both individuals and companies.
Supplying goods or services to a sanctioned person can now result in fines of up to EUR 10,000 for individuals and up to EUR 30,000 for legal entities. Identifying sanctioned persons requires clear information about company ownership and beneficial control.
However, in some cases, owners and beneficiaries have responded by changing their nationality. Ainars Bruvelis, a board member at the business data firm Lursoft, said the number of such cases surged after the invasion of Ukraine, quadrupling within a single year.
“In 2022 alone, there were already 116 cases – four times more than before. The trend continued in 2023, and we also saw another rise in 2024,” he said.
Last year, the number of nationality changes was twice as high as before the war. While some may be motivated by a desire to avoid sanctions breaches, others appear to be taking a moral stance.
“In my view, this is largely about ethics,” Bruvelis said. “A number of Latvian companies have publicly stated they do not want to continue financing Russia’s war machine. If a company owner in Latvia is a Russian citizen, dividends and other income are likely to end up being used in Russia as well.”
Laima Letina, chief public notary at Latvia’s Enterprise Register, said she did not rule out that some owners were genuinely seeking to cut ties with Russia.
“Of course, it is entirely possible that someone has a motivation to somehow avoid the restrictions imposed on citizens of Russia and Belarus. In other cases, the person may no longer have any connection with this country. And this is not about avoidance, but about the desire to separate from the aggressor states as a person,” Letina assessed.
The Enterprise Register holds data allowing authorities to check whether individuals appear on sanctions lists or belong to risk groups.
Entrepreneurs are currently required to assess potential business partners, particularly in the real estate sector, making clarity over nationality increasingly important. Further changes are expected when new regulations come into force later this year.
“Persons who believe that they are threatened by the disclosure of beneficial owner information may request the institution, in this case the Company Register, to declare such information as restricted access information. At the same time, these amendments to the law, which will enter into force in April, do not state what will happen in cases where the hidden beneficial owner is on this sanctions list,” said Bruvelis.
At present, sanctioned companies are not removed from the business register. Bruvelis argues this should change, along with the definition of beneficial ownership, which he says is currently too easy to circumvent.
But Andrejs Judins, head of the Latvian parliament’s Legal Committee, said the issue was complex.
“You can change the law,” he said, “but if it does not work in practice, then there is little point in doing so.” (LRT)