The European Committee on Crime Problems (CDPC) and the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) conducted an evaluation in 2006 of Lithuania's anti-money laundering (AML) and combating the financing of terrorism (CFT) regime against the Financial Action Task Force's (FATF) Forty Plus Nine Recommendations and Special Recommendations. The CDPC/MONEYVAL evaluation concludes that, in theory, Lithuania is characterized by a sound legal and institutional AML/CFT framework; however, the preventive measures remain modest and do not produce all the expected results. The CDPC/MONEYVAL report recommends improving the system of sanctions and the coordination of supervision between the Financial Crime Investigation Service (FCIS) - Lithuania's Financial Intelligence Unit - and financial regulators to ensure consistent and systematic controls. The Law on the Prevention of Money Laundering was adopted in June 1997 and last amended in January 2004 in line with the 2nd European Union Directive. Furthermore, money laundering and the financing of terrorism are criminalized in the 2002 Criminal Code. The FCIS is a member of the Egmont Group and, according to the CDPC/MONEYVAL report Lithuania, largely complies with FATF recommendations on international cooperation. Nonetheless, the report recommends clarifying the ability of the FCIS and financial supervisors to exchange information in AML/CFT matters.

General Overview

In their 2006 Third Round Detailed Assessment Report on Lithuania, the European Committee on Crime Problems and Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (CDPC & MONEYVAL) evaluate the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of Lithuania, based on the 2003 Forty Recommendations and the 2001 Nine Special Recommendations on Terrorist Financing of the Financial Action Task Force (FATF), together with Directives 91/308/EEC and 2001/97/EC of the European Commission (EC). According to the report, the legal and institutional framework in Lithuania regarding AML/CFT is theoretically sound. However, the preventive and repressive measures remain modest and do not produce all the expected results. Shortcomings remain in relation to customer due diligence requirements, and the reporting of suspicious transactions. Furthermore, the supervisory regime applied by the Financial Crime Investigation Service (FCIS, Lithuania's Financial Intelligence Unit) to Designated non-Financial Business and Professions (DNFBPs) is quite weak.

According to the same report, there is cause for concern in the lack of available information regarding shareholders listed on the "Registry of Legal Persons," and therefore financial institutions are unable to complete the identification and verification processes, and competent authorities may not be able to properly conduct investigations or effectively cooperate, either domestically or internationally. The CDPC & MONEYVAL report recommends improving the system of sanctions and enhancing the coordination of supervision between the FCIS and financial regulators in order to ensure consistent and systematic controls.

The Law on the Prevention of Money Laundering was adopted in June 1997 and was last amended on January 1, 2004 to bring its provisions into line with the 2nd European Union (EU) Directive. Furthermore, money laundering and the financing of terrorism are criminalized in the 2002 Criminal Code. Non-profit organizations are governed by the Law on Charity and Sponsorship, which was enacted in July 2000 and amended in April 2001. Lithuania has ratified the 1988 United Nations (UN) Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances; the 1990 Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; the 1999 UN Convention for the Suppression of the Financing of Terrorism; and the 2000 UN Convention against Transnational Organized Crime. Weaknesses remain, however, in the implementation of the UN Security Council resolutions.

The FCIS is a member of the Egmont Group. In their 2006 report, CDPC & MONEYVAL recommend giving more autonomy and powers to the FCIS. However, the report also mentions that there is over-reliance on the FCIS regarding AML procedures, and the effectiveness of the police and prosecution needs to be reviewed. Furthermore, the ability of the FCIS and financial supervisors to exchange information in AML/CFT matters needs to be clarified in Lithuanian legislation.

According to the 2006 CDPC & MONEYVAL report, the first conviction for money laundering was obtained in 2005, and at least 5 cases were brought to court in 2006 as a result of the FCIS's work. On the other hand, the Lithuanian authorities have not as yet come across cases regarding the financing of terrorism. The main sources of criminal proceeds remain drug trafficking, smuggling, the counterfeiting of money and securities, human trafficking, car theft, extortion of property, and VAT fraud.

The Principles

1. Legal Systems and Related Institutional Measures

EN

In their 2006 Third Round Detailed Assessment Report on Lithuania, the CDPC & MONEYVAL evaluate the AML and CFT regime of Lithuania, based on the FATF's 2003 Forty Recommendations (R) and the 2001 Nine Special Recommendations (SR) on Terrorist Financing, together with the European Commission's Directives 91/308/EEC and 2001/97/EC. Per this report, Lithuania largely complies with R2 on the mental element and corporate liability of a money-laundering offense, but only complies partially with R1 on money laundering offenses. The Law on the Prevention of Money Laundering was adopted in June 1997 and last amended on January 1, 2004, in line with the 2nd EU Directive. Money laundering terrorism-financing are criminalized in the 2002 Criminal Code.

Although Lithuania largely complies with R3 on the confiscation, freezing, and seizing of criminal proceeds, it only partially complies with SR II on the criminalization of terrorist financing and SR III on the freezing of funds used for terrorist financing. As noted in the 2006 CDPC & MONEYVAL report, the Lithuanian authorities have not come across terrorism-financing cases so far. The report does find that Lithuania is largely compliant with R26 on the FIU and R 30 regarding resources, integrity and training. It is also compliant with R28 on powers of competent authorities. On the other hand, it finds Lithuania to be only partially compliant with R27 and R32 on law enforcement authorities and statistics. Hence CDPC & MONEYVAL recommend giving more autonomy and powers to the FCIS. However, according to the same report, there is over-reliance on the FCIS regarding AML procedures, and the effectiveness of the police and prosecution needs to be reviewed.

Finally, Lithuania is partially compliant with SR IX on cross border declaration and disclosure. According to the 2006 CDPC & MONEYVAL assessment, the cross border declaration system is limited to cash, and the Customs and Border Guard services need to be more involved in AML/CFT measures.

2. Preventive Measures - Financial Institutions

EN

According to the 2006 CDPC & MONEYVAL report, Lithuania is compliant with R7 on correspondent banking and largely compliant with R8 on new technologies and non face-to-face business. However, it only partially complies with R5 and R6 on customer due diligence and politically exposed persons. Indeed, some key elements of the customer due diligence requirements are not provided in the Lithuanian legislation. Furthermore, there are restrictions in relation to the identification of beneficial owners of legal persons, and there are no special regulations on politically exposed persons.

With regards to record keeping (R10), Lithuania is compliant. It is also largely compliant with R9 on third parties and introduced business, and R4 on financial institution secrecy or confidentiality. In their 2006 Assessment, CDPC & MONEYVAL advise addressing the concept of the customer/agent relationship in the identification process. They also recommend improving consistency under different laws regarding protection for the lifting of confidentiality. As for SR VII on wire transfer rules, Lithuania is only partially compliant. However, as noted in the 2006 CDPC & MONEYVAL Report, Lithuanian authorities expect to fully comply with SR VII once the relevant EU Regulation is adopted.

As reported in the 2006 CDPC & MONEYVAL Assessment, Lithuania largely complies with R21 on special attention for higher risk countries, but only partially complies with R11 on unusual transactions. Indeed, there is no specific obligation to examine the background and keep the records of large and complex transactions. According to information in the same report, Lithuania is compliant with R19 on other forms of reporting and largely compliant with R14 and R25 on protection and the ban on "tipping-off." It however only partial complies with R13 and SR IV on suspicious transaction reporting. Under the AML Law, entities are required to report suspicious transactions and transactions above certain thresholds. Nonetheless, the reporting of attempted or suspicious transactions is not clearly addressed, and there is no obligation to report suspicious financial operations related to terrorism financing.

Lithuania is compliant with R18 on shell banks and largely compliant with R15 on internal controls, compliance, and audit, but only partially compliant with R22 on foreign branches and subsidiaries. As noted in the 2006 CDPC & MONEYVAL report, so far, financial institutions registered in Lithuania have not established cross-border branches or subsidiaries. However, there are no essential criteria in place to meet R22 requirements, should this situation change.

The 2006 CDPC & MONEYVAL Assessment states that Lithuania is compliant with R29 on supervisors and largely compliant with R30 regarding resources, integrity, and training, as well as R17, R23, and R25 related to sanctions, regulation, supervision, and monitoring. On the other hand, it only partially complies with R32 on statistics. Finally, Lithuania is largely compliant with SR VI on money or value transfer services. In their 2006 report, CDPC & MONEYVAL recommend improving the system of sanctions and the coordination of supervision between the FCIS and financial regulators in order to ensure consistent and systematic controls.

3. Preventive Measures - Designated non-Financial Business and Professions

EN

According to the 2006 CDPC & MONEYVAL Third Detailed Assessment Report, Lithuania is compliant with R20 on other Non-Financial Business and Professions (NFBP) and secure transaction techniques, and largely compliant with R25 on guidelines and feedback from the regulator. However, it only partially complies with R12 and R16 on customer due diligence and record-keeping on suspicious transactions reporting, as well as R24 on regulation, supervision and monitoring of DNFBPs. As stated in the report, DNFBPs are in principle subject to the same reporting obligations as financial institutions. However, the main sectors (i.e. legal, notarial, accountancy and gaming) are often reluctant to implement the internationally recognized AML/CFT standards. Furthermore, although all DNFBPs are subject to ongoing regulatory and supervisory monitoring, the supervisory regime applied by the FCIS is quite low, and guidance is inconsistent.

4. Legal Person and Arrangements & Non-Profit Organizations

NC

As reported in the 2006 CDPC & MONEYVAL Assessment, Lithuania is only partially compliant with R33 on legal persons' access to beneficial ownership, and SR VIII related to the use of non-profit organizations for terrorist activities. Information regarding compliance with R34 on legal arrangements' access to beneficial ownership and control information is not available, and the concept of trusts in Lithuania is unknown. According to the 2006 CDPC & MONEYVAL report, the unavailability of information on R34 poses serious concerns, as financial institutions are unable to complete the identification and verification processes, and competent authorities lag behind in investigating and cooperating both domestically and internationally. Nonprofits are governed by the Law on Charity and Sponsorship which was enacted in July 2000 and amended in April 2001. According to the same report, the current oversight procedures for nonprofits are focused on tax matters and do not consider CFT issues.

5. National and International Co-operation

EN

As stated in the 2006 CDPC & MONEYVAL Assessment, Lithuania is compliant with R36, R37 and R39 on mutual legal assistance (MLA), dual criminality, and extradition, as well as SR V on international cooperation. It is also largely compliant with R31, R35 and R38 on national cooperation, conventions, and MLA on confiscation and freezing. However, it is only partially compliant with R32, R40 and SR I on statistics and the implementation of United Nations instruments. Lithuania has ratified the 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances; the 1990 Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime; the 1999 UN Convention for the Suppression of the Financing of Terrorism; and the 2000 UN Convention against Transnational Organized Crime. Weaknesses remain in the implementation of the UN Security Council Resolutions, however. Although Lithuania is able to cooperate widely in the field of MLA in criminal matters and extradition, there is a lack of arrangements for coordinated seizure and confiscation actions with other countries. The ability of the FCIS and financial supervisors to exchange information in AML/CFT matters also needs to be clarified in the Lithuanian legislation.