On 8 June 2022, the Lithuanian Government approved draft amendments to the Law on the Prevention of Money Laundering and Terrorist Financing of the Republic of Lithuania (hereinafter the Law), voting on which is to be held in the Seimas.
We have learned earlier that Estonia made regulation of operations of entities dealing with crypto-assets more stringent, and that the United Kingdom introduced new requirements from 1 April 2022. Planned changes to operations of entities dealing with crypto-assets in Lithuania were also announced recently, without waiting for the effective date of the Markets in Crypto-Assets Regulation (MiCA). Plans are to adopt the latter this year, with the effective date in 2025.
The Law currently provides for the following requirements for the operations of entities dealing with crypto-assets:
- Client identification;
- Data accumulation;
- Notification of the Financial Crime Investigation Service (FNTT) about transactions involving large amounts.
Operations of entities dealing with crypto-assets do not qualify as financial services, meaning that these operations are supervised by the FNTT rather than the Bank of Lithuania.
The Bank of Lithuania is not a passive observer, however, and it announced its official position on crypto-assets back in 2017. It stated that financial services must be separated from services related to virtual currencies, i.e., financial market participants overseen by the Bank of Lithuania may not provide services related to crypto-assets. The Bank of Lithuania updated its position on crypto-assets in 2019 and 2022.
The planned amendments to the Law were initiated by the Ministry of Finance (MF), the Bank of Lithuania (BL), the Financial Crime Investigation Service (FNTT), and the Money Laundering Prevention Competencies Centre. To retain the stringent regulatory standards in Lithuania, the proposed amendments to the Law are aimed at strengthening the management of money laundering risks in the cryptocurrencies sector, improving the transparency of the management, and making the conditions of regulation of operations of service providers more stringent.
The following general amendments to the Law and amendments relating to incorporation and operations are envisaged:
- All registered companies dealing with crypto-assets will be entered on a public list.
- The requirement to have a larger authorised capital compared to companies engaged in other operations;
- More stringent reputation requirements for managers, members of collegial management bodies, and ultimate beneficiaries.
- At least some of the operations must be carried out in Lithuania;
- One of the senior management officers must be a Lithuanian resident;
- The money laundering prevention officer may not work in other companies, unless such other companies belong to the same group;
- Client identification must be performed as soon as a business relationship is commenced (regardless of the transaction amount);
- Anonymous accounts are prohibited.