Lithuanian Money Laundering Scandal: €2 Billion Washed Through Regulator-Approved Firm
Dismantling a Transnational Money Laundering Organization
Brussels/Vilnius - In a significant development, the European Union Agency for Criminal Justice Cooperation (Eurojust) announced on February 27, 2024, the dismantling of a transnational money laundering organization with an estimated €2 billion in illicit proceeds. The criminal enterprise, which operated since 2017, was headquartered at a Lithuanian Electronic Money Institution (EMI), now defunct.
The Accused Entity: A Defunct Lithuanian EMI
Eurojust did not reveal the name of the accused entity, but the regulator took enforcement action and revoked its banking license a year ago, initiating bankruptcy proceedings. Lithuanian authorities took the lead in halting the operation, which had been active since 2016 and involved thousands of criminals across the EU.
The Operation
The criminals are believed to have laundered €2 billion through a global network of shell companies owned by strawmen. Fictitious transactions were created to obscure the origin of the proceeds from tax evasion, drug trafficking, and other illicit activities. The proceeds were then used to purchase luxury vehicles, real estate, and other assets in Lithuania and Latvia.
Seemingly Legitimate Facade
Despite the EMI’s past regulatory compliance issues and non-compliance with anti-money laundering (AML) regulations, it previously held a banking license and appeared to operate as a legitimate payments service provider. This enabled the organization to fly under the regulatory radar for several years, from 2017 until 2021.
The Financial Fallout
The operational impact of this money laundering scandal was significant:
- Covered thousands of criminals
- Spanned over €2 billion in illicit proceeds
- Exploited the global financial ecosystem through complex shell company arrangements
Coordinated Action in 2022
In 2022, law enforcement worked together in a coordinated action, leading to 55 searches, the arrest of 18 individuals, and the freezing of €11.5 million in assets and bank accounts.
Effectiveness of AML Compliance within the EU
The incident raises concerns regarding the effectiveness of AML compliance requirements within the EU. The EMI in question had met all regulatory standards when it gained its license in 2016, yet it was revealed to have facilitated money laundering on a massive scale.
Mitigating Risks
To mitigate such risks, financial institutions (FIs), including EMIs, are required to employ robust AML frameworks and maintain an ongoing commitment to training their staff and equipping them with advanced tools to detect and prevent financial crimes.
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Fines for Non-Compliance
Lithuanian authorities issued $2.4 million in fines to financial institutions in 2023 due to non-compliance with AML regulations. This served as a significant reminder for payments firms and financial establishments in Lithuania to reevaluate their AML measures and invest in advanced technologies to prevent non-compliance.
For more information on AML enforcement actions and regulatory priorities from Lithuania and other regions, visit Fenergo’s data analysis of the surging AML enforcement actions in 2023.
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