Financial Crime World

Title: Lithuania’s Hidden Money Laundering Scandal: Red Flags Ignored at ŪKIO Bankas

Background

Until recently, Lithuania’s banking sector was considered relatively safe from financial crimes and a minimal target for criminals seeking access to the European Union (EU) single market. However, a new investigation by the Organized Crime and Corruption Reporting Project (OCCRP) has uncovered a multi-billion dollar money laundering scheme involving ŪKIO bankas in Lithuania, potentially tarnishing the country’s reputation.

The Allegations

  • At least US$4.6 billion was funneled through 35 suspect companies with accounts at ŪKIO bankas between 2006 and early 2013.
  • Some of these transactions originated from Swedbank, and one of the largest transactions, worth US$4.2 million, allegedly provided a bribe to Ukraine’s ex-president Viktor Yanukovych.

The Bank’s Response

  • The Bank of Lithuania issued a statement, expressing a “zero-tolerance approach to money laundering.”
  • The bank emphasized that the number of non-resident clients potentially posing a money laundering risk in Lithuania is one of the lowest in the EU.

Concerns Raised by the OCCRP Investigation

High-risk Non-resident Accounts

  • ŪKIO bankas had a significant share of Lithuania’s high-risk non-resident accounts prior to its bankruptcy in 2013.
  • The low number of suspicious transaction reports the bank submitted during the time the Troika Laundromat was operational raises questions about the efficiency of the regulatory oversight.

Fraud Scheme

  • Investigations into the bank’s insolvency revealed a fraud scheme involving the embezzlement of funds using fake loans and shell companies.

Shortcomings in Lithuania’s Anti-money Laundering Systems

  • The European Commission’s evaluation report of Lithuania’s anti-money laundering systems acknowledged significant shortcomings.
  • The Financial Action Task Force (FATF) noted that these shortcomings were not fully addressed.

Recommendations for Lithuanian Authorities

  • Conduct a thorough investigation of the OCCRP findings.
  • Share the information with other relevant authorities.
  • Increase resource allocation for on-site inspections.
  • Implement more rigorous guidance and training on customer due diligence.
  • Improve the quality and number of suspicious transaction reports submitted by anti-money laundering obliged entities.

Conclusion

Lithuania’s reputation and financial sector are at stake. It is crucial for Lithuanian authorities to act swiftly to regain the trust of citizens, customers, and partners, and to strengthen financial supervision to prevent future money laundering scandals.