CRYPTO LICENSE IN LITHUANIA
It has created a favorable environment for legal financial transactions with cryptocurrency. Lithuania has an official commercial authorization and state registration of cryptocurrency businesses (by FCIS). Lithuanian crypto license is divided into two types: Cryptocurrency exchange license and Cryptocurrency wallet license. First type allows company to exchange for the clients FIAT currencies to Crypto currencies and vice versa, as well as one crypto currencies to other crypto currencies. Second type allows company to hold the crypto funds of their clients on their wallets. The Lithuanian government offers transparent registration of cryptocurrency, gaining recognition in the financial sector.
Two types of crypto licenses can be obtained in Lithuania:
Both are under the supervision of the Lithuanian Financial Crime Investigation Service (FCIS)
Cryptocurrency exchange operator
Cryptocurrency custodian wallet operator
Service packages for registration of Lithuania crypto license
Advantages of Advanced and Full packages in comparison to Basic package
Pricing plans for AML/KYC Officer Service
Advantages of Lithuanian Jurisdiction
Requirments
- An up-to-date copy of the passport of the country of residence (scan) of all related persons
- Business Plan
- A business model of the company (brief description 1-2 A4 pages)
- CVs (Resumes) of all related persons
- Filled customer profile(s) from all the participants of the project
- Proof of residential Address for each participant is provided
- CV (Resume) of senior AML Employee
- Certificate of no criminal record for all related persons (Might be requested by the regulator)
- Share capital minimum 125 000 EUR (At the initial stage, at least 25% have to be contributed)
- Exclusive AML/KYC Officer with high qualification and impeccable business reputation and local residence in Lithuania
- AML Officer shall be employed to the company
- At least partial business focus on the Lithuanian market
- Local address for government correspondence
- Higher requirements to the business reputation of company's management
- Adapted under business model individual AML/CFT guidelines and internal control policies, corresponding to the Lithuanian legislation
- Company must identify and verify customer before establishing business relationship or when the operation exceeds certain amount
- Company must Report to FCIS
- Company must keep records and customer data
- Share capital minimum 2 500 EUR
- Local address for government correspondence
- Senior management must have a good business reputation
- Money Laundering Reporting Officer (MLRO) must prove impeccable business reputation, i.e. provide supporting documents regarding education, skills and relevant trainings
- MLRO should be officially employed by the company and have ability to correspond with Financial Crime Investigation Unit in Lithuanian language
- Adapted under business model individual AML/CFT guidelines and internal control policies
- Company must identify and verify customer before establishing business relationship or when the operation exceeds certain amount
- Company must Report to FCIS
- Company must keep records and customer data
Process and Timeline
PRELIMINARY PROJECT ASSESSMENT
1-2 days- 1.An up-to-date copy of the passport of the country of residence (scan)
- 2.A business model of the company (brief description 1-2 A4 pages)
- 3.Preferred company name is provided
- 4.Filled customer profile(s) from all the participants of the project are collected
- 1.Address of residence for each participant is provided
- 2.Budgets and scope of the project are approved according to the initial workshop
- 3.Gofaizen & Sherle operational department has drafted PoA and shared it with the Client along with further steps
REGISTRATION PROCESS
6-7 weeks- 1.Upon the documents (hard copies) receipt on hands by Lithuanian office, the sworn translation to Lithuanian language is conducted
- 2.Assistance in opening start-up account for the formation of the authorized capital of 2500 EUR
- 3.Client has transferred share capital in the amount of 2500 EUR and we have collected printout from the Bank
- 4.Drafting Articles of Association and other supplementing documents in accordance with the Client's company corporate structure
- 5.The notary deal is arranged and conducted
- 6.Processing and transfer of the documents to the commercial registry with the further entry within the registry
- 7.Company entry appears in the commercial register after one week
- 8.Assistance in opening an operational account within EMI/Crypto friendly Bank (for DEPOSIT only). Further, the Client has to execute the contribution of 31 250 EUR (25% of the declared shared capital in the amount of 125 000 EUR)
- 1.Adaptation of Articles of Association under new share capital level
- 2.Arranging a time slot for a notary deal
- 3.After the notary deal for the increase of the share capital is conducted, processing and transfer of the documents to the commercial registry
- 4.Submission of a special JAR form to the commercial registry along with the list of beneficiaries to register a company by the commercial code of activity as a Virtual Asset Service Provider (Action is done simultaneously with the share capital increase)
- 5.Ordering a set of corporate documents from the commercial registry (electronic form) in the Lithuanian language (Registry card; Articles of Association; List of Shareholders)
- 6.Conducting sworn translation of the corporate documents into the English language
- 7.Notarization and Apostille of corporate documents
LICENSING PROCESS
2-3 weeks- 1.The Client will be presented with a list of 30-40 questions (to identify risk appetites, the geography of the customers, nature of the business, etc.)
- 2.Integration of the answers into the main set of the documents (adaption of customer due diligence measures, implementations of sanctions, collecting and storing data, principles of verification, etc.)
- 3.Search for premises for rent based on the Client preferences (size, cost, location, infrastructure)
- 4.Contacting landlords and concluding a lease agreement directly with the Client's company
- 5.Key handover (Later, when it is suitable for the Client)
- 6.Assistance in choosing a KYC/KYT provider compliant with Lithuanian AML legislation
- 7.Providing legal assistance in setting up KYC/KYT software and integrating the principles of the project
- 8.Adaptation of the company's internal documentation under the relevant KYC / KYT provider
- 1.Search for a candidate for the AML/KYC officer position that meets regulatory requirements and the expectation of the project with subsequent approval by the Client of a candidate for the role
- 2.Integration and training based on the principles of the Client's operating activities
- 3.Providing and configuring access of AML officer to the electronic state environment for further reporting on suspicious and nonstandard transactions
- 4.Arranging direct employment relations between Client’s company and AML officer (preparing employment agreement, registering AML officer with tax authorities of Lithuania, SODRA)
- 5.Notifying FCIS/FNTT in regards to the appointment of the selected candidate for the position of AML officer and as a responsible person for further communication with the supervisory authorities
- 6.Further monitoring (on the monthly basis) of AML officer on FNTT/FCIS reporting issues, regular trainings, assistance in communication with regulatory bodies (assistance in answering queries; questionnaires and targeted requests from FCIS/FNTT)
- 7.Filling out a forms and submitting notification to the Financial Crime Investigation Service (FCIS) in regards to the virtual currency wallet and exchange operator activities
CORPORATE ACCOUNT OPENING AND ACCOUNTING
2-4 weeks- 1.Analysis of the most suitable Banks/EMIs, comparison of the risk appetite of the Bank in relation to the risk appetite of the Client based on previously prepared AML policies (Done simultaneously with premise search)
- 2.Collection of necessary documents from the Client side to initiate the process (flow of funds, source of wealth, description of the purpose of opening an account, key partners, company website, utility bill, etc.)
- 3.Initiation of the onboarding procedure simultaneously in 2-3 crypto friendly EMI's
- 4.Guiding the Client's company through the entire process of opening an account
- 1.Acquiring connection (if necessary)
- 2.Development of accounting rules for the client's crypto company
- 3.Integration of an accountant and preliminary consultation on the conduct of activities within the framework of crypto accounting
- 4.Initial set up and connecting to an accounting program
- 5.Further monthly accounting services
A comprehensive and tailored approach
Versatile experience
Long-term partnerships
A comprehensive and tailored approach
Versatile experience
Long-term partnerships
Taxation of crypto companies and cryptocurrency transactions in Lithuania
Taxation of crypto companies in Lithuania
- Virtual currency exchange services are not subject to VAT.
- Services provided and accounts paid in virtual currencies are subject to normal VAT rules.
- The cryptocurrency company’s profits are taxed at a rate of 15%. A micro company with less than ten employees and less than 300,000 euros of gross annual income may be taxed at a reduced corporate tax rate of 0-5%.
- Income tax (WHT) 15% is levied on distributed profits (dividends paid).
Taxation of crypto transactions in Lithuania
The taxation of transactions in virtual currency depends on the nature of the transactions. There is no direct tax if the token is sold or purchased similarly to a security, investment or other currency.
Sales are considered normal/regular, even if payments for goods and services are received in virtual currencies. For accounting purposes, the transaction must have a value in euros and VAT rules are applied according to a normal transaction. Payment of goods or services in virtual currency does not exempt from VAT. If VAT is applied to payments in physical currency, it should also be applied to payments in virtual currency. VAT declarations must be submitted in euros and VAT will be paid / returned in euros.
Financial Crime Investigation Services (FCIS/FNTT) as regulatory body in Lithuania for VASP
The Financial Crimes Investigation Service, or FCIS (Lithuanian: Finansinių nusikaltimų tyrimo tarnyba or FNTT), a Lithuanian financial intelligence unit, is a law enforcement agency under the Ministry of the Interior. FCIS has primary responsibility for implementing measures to prevent money laundering and terrorist financing to ensure the effective functioning of Lithuania's anti-money laundering systems, as well as for investigating financial crimes and money laundering.Its primary mission is to protect the public financial system from criminal acts and other violations of the law that can undermine the reputation of the state.
To achieve the goals of investigating financial crimes, FCIS is developing methods of combating criminal organizations, namely, active participation in the National Crime Prevention and Combating Corruption Program, and developing public communication strategies to engage society in the fight against financial crime.
To prevent damage to the state budget, the Service identifies, investigates, and prevents any criminal financial acts, which include: theft of VAT, money laundering, manipulation of the tax system, and illegal receipt or use of financial assistance from the EU.
The FCIS is the primary supervisory authority for the VASP. Companies must comply with their reporting obligations to the FCIS. This includes suspicious activity reports and cash transaction reports that arise from transactions (including related transactions) that exceed a threshold of €15,000.
KYC/AML/CFT procedural rules
This is a general and fundamental document necessary for the operation of VASP.
KYC (Know Your Customer) is a mandatory customer identification procedure. It includes thorough selection procedures (criteria) as well as identification (passport/biometric data). In addition, they are used to track transactions and analyze them.
Analysis occurs on all transactions and actions of a particular customer, identifying his or her typical traits and actions. If a customer makes an atypical transaction, the KYC officer should signal the need for verification
AML (Anti-Money Laundering) - recognition of money laundering schemes based on the analysis of aggregated data.
Suspicious transactions are detected by analyzing all the data that is available. The problem lies in the so-called false positives - transactions that are not part of the criminal scheme, but by algorithms look like this.
Thus, AML cannot yet exist without human involvement. Specialists go through all transactions that the algorithm considers suspicious and, if necessary, correct the error
What is FCIS, and how does it relate to cryptocurrency
FCIS creates methods to combat criminal activities against the Lithuanian financial system. So, its duties include the identification of economic terrorism, money laundering, and corruption.
So, this service is trying to do everything to prevent the possibility of embezzlement of budget funds or non-payment of taxes, corruption, and other financial crimes. Also, it conducts a pre-trial investigation, which allows it to identify the perpetrators and provide the court with the necessary evidence.
In the legal sphere of Lithuania, cryptocurrencies are associated with ordinary fiat currency, and many of the rules that apply to the Euro are also valid for cryptocurrencies. Thus, cryptocurrency companies fall under the scope of the FCIS in matters of money laundering and financial terrorism.
If people who have companies want to get a crypto exchange license, they need to get the necessary documents and apply to FCIS. This service will examine all the data and decide within several working days. Without the permission of FCIS, no crypto company can legally operate on the territory of Lithuania.
What kind of activities is possible to conduct under crypto license in Lithuania
Exchange crypto to crypto
Virtual Asset Service Providers (VASPs) may offer cryptocurrency exchange services in which the Client will be able to exchange cryptocurrencies for other cryptocurrencies. Since VASPs are not authorized to provide services for security tokens, an additional license from a financial institution will be required for this purpose. Based on this, having a Lithuanian cryptocurrency license provides the ability to provide exchange services, you need to do an analysis and make sure that by providing these services, no security tokens will become available.
To ensure the continuance of prompt execution of orders it may be useful to work with several liquidity providers.If you want to work with security tokens, you should pay attention to opening an EMI license. Our company can advise you on this matter and assist you in opening licenses of different types and jurisdictions.
Exchange crypto to fiat
The company may provide services for exchanging cryptocurrency for fiat currency. Using the services of a virtual asset exchange provider, a Client can exchange or sell available cryptocurrency for fiat currencies.
If a financial institution plans to work with security tokens, it is necessary to open an additional financial institution license to ensure continuity of operational execution of orders it may be useful to work with several liquidity providers.
Since VASPs are not authorized to provide security token services, a detailed analysis of exchange services must be done to ensure that they do not violate the law, as the license may be revoked if rules are violated.
Exchange fiat to crypto
In addition to exchanging crypto for crypto, VASP may offer its clients the service of exchanging fiat funds for cryptocurrency. A customer can buy and sell existing cryptocurrency for fiat currencies using the services of a virtual currency exchange provider.
In this case, as with crypto-to-crypto exchanges, when providing access to cryptocurrencies, the VASP must evaluate and ensure that no security tokens will be available. As a reminder, this type of license does not authorize a company to provide services for security tokens, a separate license from a financial institution is required.To accept payments in fiat currency from Customers, VASP must use the services of a digital payment system to accept payments into the VASP account either by bank transfer or by bank card payment.
It can be useful to work with several liquidity providers and open several types of licenses to ensure continuity of operational execution of orders.
Storage crypto on behalf of the users
The VASP may offer the wallet services within which the VASP opens the wallet for the Customer and private keys will be held under the control of the VASP.
Wallets are digital offline (cold wallets) or online (hot wallets) based on key encryption. They are used to send and receive cryptocurrencies securely.
VASPs can provide services in which personal wallet keys are created or stored and funds belong to the user, not the service provider. The Client can deposit, store and withdraw cryptocurrencies using this wallet. The company needs to take sufficient measures to ensure the safety of Clients' funds. When choosing a virtual wallet, customers primarily rely on the company's reputation, security, and guarantee of the preservation of their funds;these points should be approached with maximum responsibility.
Store fiat for certain period of time (not specified timeframes by the law), but it should be exchanged in the end to crypto
VASP may accept fiat currency as a prepayment for services (generally, to purchase cryptocurrency). This prepaid amount in fiat currencies may be reflected in the Client's account as a "balance in fiat currencies".
To accept payments in fiat currency from Customers, VASP must use the services of a digital payment processor to accept payments into the VASP account via bank transfer or bank card payment, and a payment service provider to securely store fiat currencies.
Informational services on the balance
VASP has the authority to manage and safeguard cryptocurrency depository wallets belonging to clients, and store and provide clients with information services on balances, and incoming and outgoing transactions. Clients may request up-to-date information regarding their accounts.
Please note that this information may be requested by regulators under KYC guidelines. Therefore, it is important to maintain ongoing analysis and reporting.
On behalf of the clients order send crypto to the 3rd party
VASP may offer services to transfer cryptocurrency from the Client's wallet to a wallet specified by the Client, being an intermediary.
At the same time, the target wallet may or may not be located in the same VASP and may belong to the same Client or a third party. There are virtually no restrictions on location or recipient. The company providing cryptocurrency services can fully control this process, according to its authority.
At the same time, during the provision of transfer services, it is important to apply due diligence measures through which the recipient's wallet is evaluated. For the reputation of the company, virtual service providers should provide the client with protection from fraudsters and in case of suspicious transactions, take proper security measures.
ICO
The Lithuanian VASP can also conduct ICOs, in which an offer to buy its cryptocurrency is made for the first time through the VASP.
ICO, or Initial Coin Offering (initial placement of tokens) - the issue of some project coupons or tokens, which are designed to pay for the services of the site in the future - in the form of cryptocurrency.
Please note: businesses conducting ICOs are subject to several additional requirements under Lithuanian AML law, such as the obligation to provide the requested information regarding the ICO within seven business days (or less) of receiving the request from the Financial Crimes Investigation Service.
To prevent a situation with possible license revocation, it is important to comply with all AML rules.
Staking
VASPs have the right to use stacking as an additional tool to generate passive income from cryptocurrencies. Many blockchains use Proof-of-Stake consensus algorithms and their counterparts.
This is a profitable alternative to classic cryptocurrency holding and is analogous to bank deposits in crypto. Yields can reach 10% per annum and higher. The main essence of the service is to block a certain amount of crypto-assets for a certain period, thus being able to keep the blockchain running - directly or through intermediaries.
Legal framework
In Lithuania cryptocurrency is entirely legal. Its regulation is carried out taking into account the requirements of the Law on the Prevention of Money Laundering and the Financing of Terrorism. If you cannot independently understand the laws regarding cryptocurrency regulation, you can seek help from our specialist.
Before you can get a license to use cryptocurrencies, you need to register a limited liability company (UAB). The minimum authorized capital for obtaining a permit is 2500 Euro. You can set up a company while visiting Vilnius or entirely remotely with the help of a trustee located in Lithuania.
At the moment, a limited liability company is the most popular form of company management. It assumes that the company's authorized capital is divided into shares that can be wholly or partially sold or bought, donated, or inherited. UAB must have one owner and one director (individual) who manages the company.
AML/KYC
Every company that uses cryptocurrencies should have an AML/KYC Compliance Officer. A director or a member of the company's board must choose a person for this position. FCIS puts forward the basic rules for the selection of personnel:
- The person applying for this position must have the appropriate education, work experience, and skills necessary for risk assessment. In addition, the personal qualities of a person and reputation are of great importance here.
- The company must provide training to all employees involved in financial transfers. Employees in the state should be regularly briefed on how to identify illegal financial transactions, prevent assets laundering, and act in different situations.
An AML officer must control all financial transactions and cooperate with clients, financial institutions, and regulatory authorities. It would be best if you gave the person you have chosen more power so that he or she can do their job well. An excellent solution would be to hold a high position, for example, a director or a member of the board. In this case, the employee will know all the features of the company's work better than any other employee.
The AML officer has a relatively large list of responsibilities, which includes:
- Development and maintenance of an AML program;
- Information collection and analysis on suspicious transactions;
- Submission of statements of compliance with the relevant authorities;
- Supervision of high-risk clients and reporting of suspicious activity;
- Communication with FCIS in case of suspected money laundering;
- Development and maintenance of a risk assessment system for products and services;
- Monitor and implement an ongoing AML training program for other company employees;
- Reporting to senior management on matters related to internal AML policies and procedures, and more.
It is also the responsibility of the AML specialist to carefully screen new customers and, if necessary, communicate with them. In addition, the specialist must supervise financial transfers for more than 15 thousand Euros (or equivalent in another currency).
The specialist must intervene in the company's work if he notices false documents provided by the client or notices suspicion of money laundering.
If you decide to obtain crypto license in Lithuania, then you can turn to our company for help. Professionals who know their work well work here, they are ready to take on both a small company and the creation of a large international cryptocurrency exchange. If you want to open an electronic crypto wallet, then you will also need a license for this.
How to apply AML/KYC measures in Lithuania (FAQ)
How to identify natural persons?
VASPs must collect identification information and verify the identity of the Customer who is an individual and verify whether he or she is the actual beneficial owner.Verification of the Customer can be face-to-face or non-face with the use of technological means. Verification of the identity of an individual may be performed based on the following identity documents:
- Identity card of the Republic of Lithuania;
- An identity document of a foreign country;
- Residence permit in the Republic of Lithuania;
- A driving license issued in a state of the European Economic Area by the requirements laid down in Annex I to Directive 2006/126/EC of the European Parliament and of the Council of 20 December 2006 on driving licenses (redrafted).
How to identify legal entities?
VASPs must collect identification information and verify the identity of the Client and his/her representative, who is a legal entity, as well as identify the beneficial owners of the Client.The beneficial owner of the Client, which is a legal entity, is a natural person, whose direct or indirect participation or the sum of all direct and indirect participatory interests in the legal entity exceeds 25 percent, including participation in the form of shares or other forms of the bearer.Checks can be face-to-face and non-face with the use of technical means. Verification of the identity of a legal entity may be carried out based on the following documents:
- The registration card of the relevant registry; or
- a document equivalent to the above documents, or the relevant documents of the Customer's institution.
When it is necessary to conduct KYC verification?
Transactions between traditional currency and cryptocurrency from a verified trader are significantly more than those made by users with an unverified identity.
And now this data is very valuable, as new investors and traders will more often use safe platforms to launch their cryptocurrency business. Thus, we can conclude that the application of the KYC procedure will increase confidence in legal entities and individuals who want to master the new financial sphere.
What actions are required by Lithuanian law?
It is necessary to perform due diligence on clients before entering into a business relationship with them or before conducting a single transaction (including related transactions) of EUR 1,000 or more. After the amendments to the Lithuanian AML/CFT law come into force, this threshold will be increased to EUR 700
What documents should be gathered during verification process?
To carry out identity verification, it is necessary to collect a document proving your identity. In the case of an individual, the identity document may be:
- Identity card of the Republic of Lithuania;
- An identity document of a foreign country;
- Residence permit in the Republic of Lithuania;
- A driving license issued in a state of the European Economic Area by the requirements laid down in Annex I to Directive 2006/126/EC of the European Parliament and of the Council of 20 December 2006 on driving licenses (redrafted).
In the case of a legal entity:
- The registration card of the relevant registry; or
- Certificate of registration of the relevant registry; or
- A document equivalent to the above documents, or the relevant documents of the Client's institution.
What are the minimum KYC requirements?
Due diligence measures application consist of:
- The verification of Customers and their representatives (where applicable) identity;
- Identification of the beneficial owner and their identity;
- Collecting the proof of address document (Proof of address document may be, for example:
- Utility bill;
- Rental agreement;
- Bank account statement;
- etc.
- Identification and verification of the proof of the source of wealth and funds of the Customer;
- Customer’s PEP status verification
- Sanctions list check
- Identification of the purpose and nature of the business relationship;
- Monitoring of the business relationship (incl, updating of the Customer’s data and monitoring of transactions)
What are the limits for enhanced due diligence measures applicable?
The precautionary measures should be applied in the case of:
- When opening an account for a new client
- When doubts arise about the authenticity of the documents provided by the client, as well as his data
- If a KYC employee suspects money laundering or sponsorship of terrorism
- And also, if the transaction (including related transactions) exceeds 15,000 euros, the source of the funds must be collected additionally from the Client as a cash transaction report must be sent to FCIS (which is caused by the 15,000 euro threshold).
It should be noted that there should be no suspicious factors here and the obligation arises solely from exceeding the limit. Otherwise, the law does not set specific limits for the application of EDD, and any limits must be set by each VASP individually, depending on their risk appetite.
Otherwise, EDD must be applied in cases where there are risk factors that create an increased risk of money laundering and/or terrorist financing (including the client's PEP status, relation to high-risk countries, cryptocurrency transfers, etc.) - minimal.
Is the travel rule is necessary for Lithuania?
Currently the travel rule is not implemented by the Lithuanian AML law, however, the new amendments to the legislation has implemented this requirement and it will be applicable in 2025.
Additionally
From November 1, 2022, the Lithuanian government adopts new legislation to regulate cryptocurrencies. They want to prevent the moment when the activity of "dishonest companies" can undermine the image of the sector. Deputy Finance Minister Mindaugas Liutvinskas said during a meeting with journalists that the government plans to create a licensing system at the national level before the adoption of the EU single regulatory law.
"We support MiCA - it's an important and the right decision, but the EU law will not be adopted until 2025. We decided to take practical steps now and do all our homework to strengthen our regulatory framework," Lytvinskas says.
The Deputy Minister of Finance believes that the state is obliged to prevent all negative consequences for investors. The draft will include requirements for companies, authorized capital, and special rules to combat money laundering.
At the same time, the authorities criticize the EU for a too rigid approach to the supervision of cryptocurrency transactions and want to find a compromise between the interests of the state and the interests of investors.
Prospects for a company with a cryptocurrency license
For startups. If you are planning to start a cryptocurrency company, the ideal solution is to get a Lithuanian license for your business. The Lithuanian government creates favorable conditions for the development of young companies. You will be able to build a business in a loyal legal environment to regulate cryptocurrency activities with an attractive tax policy and minimal costs to obtain a license, which is very important for young companies.
For existing businesses. Getting a cryptocurrency license will allow you to scale your business in a legal jurisdiction, attract investors and increase your income.
For investors who want to scale a business - this is the most promising option in the European market.
Lithuania meets all the requirements of investors: taxation, level of corruption, right to property, legal protection, bureaucracy, the government supports the development of technology and adoption of new laws.
Lithuanian law does not expressly prohibit the geographic areas from which VASP can accept Clients.
However, all possible risks must be identified and documented by each VASP. In the event of increased risk, appropriate and sufficiently extended due diligence measures shall be applied to Customers. In particular, those whose place of residence is in one way or another associated with a higher area of risks and violations of law.
What steps are required to take?
- Request a second identity document,
- Requesting a document confirming the availability of funds,
- Conducting additional searches in information databases,
- Setting a limit on the allowed daily/monthly transaction, etc.
Many service providers have emerged that offer transaction monitoring services to identify any suspicious and unusual activity and advertising transactions, as well as transactional activity that exceeds established thresholds (e.g., concerning reporting obligations).
Transaction monitoring or "know your transactions" (KYT) procedures must be conducted promptly and must be able to detect multiple patterns and indications of possible suspicious and illegal activities.
When selecting a KYT service provider, a company should evaluate the ability to select different settings in the service provider solution, the ability to utilize responsive customer support, and other important factors that VASP considers important to its effective operation.
The most commonly used KYT service providers include Chainalysis, Scorechain, and Crystal Blockchain.
Specialized programs help firms control the personnel screening process, allowing them to automatically identify high-risk clients and reduce the likelihood of human error and false positives. This is a multi-step operation that involves collecting and analyzing personal information from clients.
To verify this data, institutions send the information to many independent third-party verifiers. Organizations compare it with the official database to confirm that the information is valid and meets the entire parameter.l
Such monitoring, of course, can also be done manually, but a completely manual solution can only work effectively for VASPs whose transaction volume is very smal
If during the inspection, the Supervision Service of the Bank of Lithuania determines that the company is unable to properly identify customers, provide a report, etc. - sanctions may be adopted: fines, restriction of the company until the elimination of all deficiencies. This may also include negligent assessment of the individual risk of clients, lack of updating information, and improper execution of transaction analysis. In this case, after paying the fine, the company has a certain period to correct the errors. The VASP must provide a detailed plan of action to the regulator within 20 working days.
Responsibilites of AML/KYC Officer
Act as a point of contact for FCIS, send reports to FCIS, apply customer due diligence, and help management effectively assess and manage AMCTF risks. The KYC employee is responsible for registering clients and applying CDD and EDD measures, as well as applying ODD measures. Tasks also include responding to customer inquiries. AML officer responsibilities include tasks that help the Company assess and manage the risks associated with the provision of services as effectively as possible. Their tasks include training personnel, helping to create risk management policies, monitoring compliance with the Company's risk appetite, etc. The employee must provide written compliance statements to management, maintain suspicious transaction reports, and analyze all possible risks. If criminal activity is suspected, contact FCIS. The AML officer must introduce continuous monitoring, organize and conduct audits of external organizations, in addition, develop compliance recommendations.
FCIS requirements to the AML/KYC officer
The FCIS does not impose specific requirements.
The officer must have the appropriate education, experience, and knowledge to perform his tasks, have experience in the financial sector, and have an impeccable reputation without a criminal record.
The company needs to provide special training on measures aimed at preventing money laundering and terrorist financing for company employees, especially for the one who deals with customer relations and controlling transactions.
Reporting obligations
A company must report to FCIS on activities or circumstances that have been identified in the course of business and through which:
- The Company has established that the Client is carrying out a suspicious operation;
- The company knows or suspects that assets of any value are derived directly or indirectly from criminal activity or involvement in such activity.
This reporting obligation must be fulfilled within 3 business hours of the discovery of the act or circumstance or the actual suspicion. In addition, VASPs must report to FCIS all transactions (including related transactions) amounting to or exceeding €15,000 in value. This reporting obligation must be fulfilled within 7 business days of identifying such a transaction.
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