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In another sign that European regulators are intent on addressing fraud, the Bank of Lithuania has unveiled an action plan for tackling the issue from a policy perspective.
The proposal, which the central bank says has been presented to law enforcement agencies, regulatory institutions and trade associations in the country, outlines the need for a cohesive approach to tackle rising fraud cases.
Central to the initiative is the establishment of a coordinating institution to unify efforts across public and private sectors, which the regulator says will be crucial in creating a seamless system for incident response and information exchange.
"We see many important initiatives in the fight against fraud, but a systematic approach is necessary,” said Gediminas Šimkus, chair of the board of the Bank of Lithuania.
Šimkus continued that in order to strengthen the resilience of both the state and the population to fraud, the central bank is “providing our ideas and proposals on how to address this problem, especially in view of the future prospects and challenges”.
“The main solutions we propose are related to the coordination of this issue at the state level, cooperation and exchange of information."
A key challenge highlighted in the proposal is fragmented legal regulation. For example, current measures are spread across multiple legal acts, resulting in limited cooperation between institutions and insufficient sharing of critical information.
This lack of coordination, coupled with privacy concerns, has hindered effective prevention and suppression of fraud, and the Bank of Lithuania has emphasised that not all institutions or market participants are equally engaged in the fight against financial fraud, leading to gaps in the system.
A growing problem
The urgency of the issue is underscored by alarming statistics from the Centre of Excellence in Anti-Money Laundering. Since 2020, reported fraud cases have surged more than sevenfold, with financial losses escalating from €4.8m in 2020 to €12.3m in 2023.
The Bank of Lithuania’s proposal calls for an integrated strategy to address the underlying causes of fraud, restore public trust in the financial system and ensure payment services remain secure.
Key objectives of the proposed system include improving public-private sector collaboration, appointing a central coordinating body and enhancing information exchange on cyber threats and vulnerabilities.
The initiative aims to analyse and respond to cyber incidents, develop tools and methodologies for risk management, and support law enforcement in improving their capabilities.
In addition, the central bank’s plan envisions voluntary long-term cooperation agreements among institutions to manage fraud risks effectively.
The strategy also outlines the establishment of performance indicators, an action plan for implementation, and a framework for accountability and periodic updates.
The coordinating body would play a pivotal role in aligning efforts, resolving disputes and ensuring the system’s adaptability to emerging threats.
A clear vision
To achieve its goals, the Bank of Lithuania stresses the need for a unified vision, robust cooperation among stakeholders and a commitment to shared objectives.
By addressing current inefficiencies and aligning national priorities, the initiative aims to position Lithuania as a jurisdiction resilient to financial fraud, safeguarding its financial system and the trust of its citizens.
However, there are plenty of challenges for the Baltic state to grapple with if it wants this to be a success.
For example, harmonising laws into a cohesive structure requires significant legal reform, which may face resistance or delays in the legislative process.
In addition, striking a balance between financial fraud prevention and compliance with stringent data protection laws such as the EU’s General Data Protection Regulation (GDPR) could be challenging.
Misalignment between fraud prevention efforts and privacy requirements could lead to legal disputes or operational inefficiencies, and bureaucratic blockers may damage stakeholders’ motivation.
A further factor is that financial fraud often involves cross-border elements and limited international cooperation or differences in legal frameworks across jurisdictions could impede Lithuania’s efforts to address fraud originating outside its borders.
This may mean that the relatively small EU economy has to rely on action in Brussels for better methods of preventing fraud, rather than bolstering efforts itself.
