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Lithuania’s central bank has revoked the licence of epayblock, an e-money institution, due to anti-money laundering failures.
Having assessed the severity and duration of the breaches, as well as other circumstances, the Bank of Lithuania has revoked the licence of UAB epayblock.
This means that the e-money institution is no longer entitled to provide any financial services.
Epayblock, which states on its website that it allows customers to open bank accounts in minutes, as well as offering an application programme interface (API), has to now return any funds to its customers to their personal accounts, either with their banks or other credit, payment or electronic money institution as indicated by them, within the time limits specified in legal acts.
The situation that led to epayblock having its licence revoked began earlier this year, when the Baltic central bank received complaints and other supervisory information about some of the financial institution’s customers potentially using its services to undertake fraudulent activities.
In July, the Bank of Lithuania responded by initiating an investigation, as well as obtaining court permission to apply to the institution temporary restrictions on the provision of services to its customers.
The investigation revealed significant systemic breaches, according to the supervisor.
This included:
- A failure on the institution’s part to identify and assess money laundering and terrorist financing risks of its customers.
- Employees responsible for the prevention of money laundering and terrorist financing did not have the necessary qualifications and were not properly prepared to carry out compliance procedures.
- Non-compliant customer identification procedures were not in line with legislative requirements, including higher-risk customers being subject to mandatory, additional enhanced due diligence measures.
- Failure to take sufficient measures to identify the objective and nature of business relationships, as well as ascertain the true activities of its customers, including verifying such information using reliable and independent sources.
- Not performing the monitoring of customer transactions.
- Inadequate internal control procedures, including failing to ensure the independence of the compliance function from business interests.
Epayblocks joins other institutions to have recently had their licences revoked by the central bank.
In June, the supervisor also revoked the licence of payments institution Finolita Unio for severe infringements of anti-money laundering/counter-terrorism financing requirements. This followed an investigation that was triggered by its close links to Germany’s scandal-laden payments champion Wirecard.
Lithuania’s reputation as a fintech friendly hub in Europe has been, in many respects, a double-edged sword. The country was a major beneficiary of the post-Brexit fintech flight from London, having seen the likes of Yapily and Revolut set up shop in the country.
Yet, growth has also resulted in an uptick in financial crime.
From January to September 2021, for example, the number of suspicious transaction report (STR) notifications increased 20 times compared with the same period the previous year.
Meanwhile, the number of requests to suspend monetary transactions has almost tripled compared with the same period in 2020.
Upon revoking the licence of payments institution Contabilita in 2020, Jekaterina Govina, the central bank’s director of supervision, warned: “We have repeatedly stressed that the Bank of Lithuania is a fintech-conducive regulator, yet we have zero tolerance to non-compliance with legal acts or abuse of our trust.”
