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The Bank of Lithuania has signalled its commitment to tightening compliance in the payments and e-money sector, handing out fines totalling more than €1m for breaches of compliance.
The latest players to face punitive measures are Phoenix Payments, KogoPay and Maneuver LT.
The Bank of Lithuania said in a bulletin on its website that it had inspected Phoenix Payments and found significant violations in preventing money laundering and terrorist financing.
These included inadequate internal controls, poor customer identification and insufficient transaction monitoring.
Phoenix Payments also relied on partners to implement preventive measures but failed to manage these processes effectively, according to the central bank.
For example, most clients of the e-money institution using these services posed a higher risk for money laundering and terrorist financing, and the institution's internal controls were insufficient, while enhanced client identification measures were ineffective, as confirmed by the inspection.
The Bank of Lithuania also said that the institution did not properly monitor client business relations and operations, often failing to align transactions with the available client information. Internal investigations of suspicious transactions were incomplete, and the origins of client funds were often unclear without additional information being gathered.
In many cases, the purpose and economic validity of transactions were not properly clarified.
Despite these issues, the Bank of Lithuania acknowledged the institution's cooperation and efforts to address the shortcomings, and Phoenix Payments received a fine of €970,000 and must eliminate the remaining violations and deficiencies by July 31.
Until then, it is restricted from establishing new business relationships and providing financial services to high-risk clients.
Further enforcements
The Bank of Lithuania also said in the bulletin that it had determined that Maneuver LT, which operates commercially as Genome, violated anti-money laundering and counter-terrorist financing regulations, imposing sanctions and a mandatory order.
For example, the institution's client due diligence procedures failed to clarify the purpose and nature of business relationships, and it also failed to take appropriate measures to determine the nature of clients' business activities, resulting in a warning from the Bank of Lithuania.
It also found shortcomings in Maneuver LT's enhanced customer identification procedures, and determined that the institution did not properly apply enhanced measures for high-risk clients or adequately formalise the evaluation of customer documents.
The bank also found that Maneuver LT failed to determine the source of assets and funds for high-risk clients.
In addition, it said that the institution lacked adequate procedures for monitoring client business relations and operations, its tools were insufficient for the scale and nature of its operations, and it did not ensure transactions matched its knowledge of clients, analyse complex transactions, or identify and report suspicious transactions in a timely manner.
The regulator said that the institution has now addressed some deficiencies and has submitted an action plan for eliminating the remaining issues.
Nevertheless, the Bank of Lithuania has fined Maneuver LT €80,000 and required it to resolve all violations and deficiencies by September 31.
In a statement shared with Vixio, a spokesperson for the company said that it believes audits are crucial for the transparent operation of any financial institution, and appreciates the Bank of Lithuania’s efforts in this regard.
The spokesperson said Maneuver LT “takes compliance with major regulations extremely seriously”, adding that “our team is confident that the audit will help improve our services and the security of our clients”.
Genome confirmed to Vixio that it has submitted an action plan to the Bank of Lithuania, outlining the steps it will take to eliminate the remaining problems identified during the audit.
The Bank of Lithuania also revealed in the bulletin that it had found that KogoPay improperly stored customer funds in another electronic money institution instead of a credit institution, violating the Law on Electronic Money and Electronic Money Institutions.
KogoPay also missed deadlines for approving annual financial statements, deciding on profit distribution and submitting a supervisory report.
According to the central bank, the company had acknowledged the violations and took corrective actions.
Consequently, it fined KogoPay €30,000.
