AML in Lithuania

In 2016, Lithuania was the subject of a money laundering report produced by the US Department of State’s International Narcotics Control Strategy Report (INCSR). According to this assessment, Lithuania’s legal safeguards against money laundering are considered sufficient since it isn’t a financial hub. However, its geographical position along the border between Russia and Belarus has rendered it susceptible to illegal trafficking and tax evasion offenses. Notably, value-added tax (VAT) fraud stands out as a major contributor to illicit profits in Lithuania. Money laundering endeavors often interconnect with fiscal crimes like tax evasion, encompassing activities such as undervaluing goods for VAT purposes, unauthorized capital transfers, illicit trade in cigarettes, and illegal alcohol sales.

Furthermore, the Republic of Lithuania has enacted fundamental laws aimed at Preventing Money Laundering and Financing of Terrorism. These include provisions such as:

1. The transformation or transfer of property to facilitate the unlawful origin of assets or involve any party tied to the property.
2. Concealing the actual property, its source, origin, location, rights associated with it, or information acquired through criminal actions related to the property.
3. Acquiring and utilizing information about property during the commission or possession of a crime.

Engaging in any activities outlined above qualifies as money laundering, warranting the application of legal action.

Lithuania is not included in the list of countries identified by the FATF as having significant Anti-Money Laundering (AML) shortcomings. The most recent Mutual Evaluation Report assessing Lithuania’s adherence to money laundering and counter-terrorism financing standards was conducted in 2019. According to this evaluation, Lithuania achieved compliance with 9 out of FATF’s 40 recommendations and demonstrated substantial alignment with 23 others. Furthermore, Lithuania is not currently subjected to any international sanctions.

The responsibility for addressing anti-money laundering and terrorist financing in Lithuania lies with the following entities: the Government of the Republic of Lithuania, the State Security Agency of the Republic, the Lithuanian Financial Crime Investigation Service, the Lithuanian Bank, the Customs Office, the Cultural Heritage Protection Agency under the Ministry of Culture, the Lithuanian Notaries Chamber, the Lithuania Judicial Chambers, the Lithuanian Chamber of Auditors, the Lithuanian Bar Association, and the Lithuania Analysis Office.

Furthermore, the Anti-Money Laundering Center of Excellence, established in Lithuania, emphasized the need for collaborative efforts between the public and private sectors to fortify the anti-money laundering and counter-terrorism financing (AML) framework. As a result, the Government of the Republic of Lithuania sanctioned the establishment of the AML Center of Excellence on April 6, 2020. The Bank of Lithuania, the Ministry of Finance of the Republic of Lithuania, and commercial banks operating within the country will serve as its founders and stakeholders. The Financial Crime Investigation Service, Police Department, State Tax Inspectorate, and Prosecutor’s Office are anticipated to participate in the center’s activities. The primary goal of establishing the AML Center of Excellence is to implement the most effective AML practices, thereby reducing instances of money laundering activities in Lithuania.

Even though Lithuania doesn’t hold a prominent status as a major financial hub, certain sectors within the country are still deemed to possess elevated susceptibility to money laundering. In an effort to mitigate money laundering risks, Lithuania enforces regulatory oversight and monitoring of high-risk industries. The following sectors are generally recognized as high-risk in Lithuania, subject to Anti-Money Laundering (AML) regulations. Non-compliance with these regulations within these sectors can lead to initiation of criminal proceedings.

1. Cash-based goods trade
2. Real estate trade
3. Banking activities such as fund transfers and cash deposits to current accounts
4. Professionals including accountants, auditors, and tax advisors
5. Notaries
6. Gambling sector, encompassing casinos and online gambling
7. Currency exchange offices
8. Investment companies
9. Payment and electronic money institutions
10. Credit unions
11. Non-profit organizations and religious groups
12. Crowdfunding platforms

To illustrate the significance of these sectors, consider the Gambling sector, which has been rated as a maximum of 4 on a scale from 1 to 4 in terms of its susceptibility to property laundering. This evaluation is especially pertinent to casinos that have been identified as potential conduits for laundering illicitly acquired assets. The Casino sector in Lithuania is considered high-risk due to its potential to attract cash flows from organized crime groups, Politically Exposed Persons (PEPs), and individuals engaging in money laundering from countries with high-risk profiles.