Financial Crime World

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Lithuanian Payments Firm Accused of Laundering €2 Billion in Money Laundering Scandal

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A shocking revelation was announced by Eurojust on February 27th, 2024: an online business offering large-scale money laundering services had been taken down, with estimated proceeds of €2 billion. This scandal mirrors recent activity in Singapore uncovered in late 2023.

Background Information

The accused company, a Lithuanian Electronic Money Institution (EMI), was shut down in 2022 for non-compliance with anti-money laundering (AML) regulations. Its banking license was revoked by Lithuanian financial and judicial authorities, and bankruptcy procedures began.

The Criminal Operation

The criminal operation, which centered around the EMI, had been ongoing since 2017 and involved a global network of shell companies. Two main suspects used this network to launder an estimated €2 billion, while a third suspect in Italy was arrested for laundering €15 million through the same EMI network, gained by defrauding Italian authorities of public funds.

Modus Operandi

The accused EMI created fictitious transactions via a global network of shell companies and enterprises, run by strawmen. The organized crime group (OCG) laundered proceeds from various criminal activities, including tax evasion and drug trafficking, by purchasing luxury vehicles and real estate in Lithuania and Latvia.

The Scale of the Scandal

What’s striking about this case is that the EMI held a banking license until 2022 and appeared to operate as a legitimate payments service provider. The company ticked the right boxes for AML compliance, allowing it to fly under the radar of regulators and law enforcement from 2017 to 2021, when investigations began in Italy.

  • The scale of the Lithuanian money laundering scandal is staggering: it spanned three European economies, laundered over €2 billion, was used by thousands of criminals across the EU, exploited the global financial ecosystem through numerous shell companies, and took around three years to shut down.
  • 55 places were searched, 18 people were arrested, €11.5 million in assets and bank accounts were frozen, and 250 judicial representatives and law enforcement officers were active on the ground.

Consequences

This case highlights the dangers of viewing compliance as a purely tick-box exercise and the importance of implementing actionable financial crime prevention processes at financial institutions (FIs). The criminal activities of this EMI raise alarming questions about the effectiveness of AML compliance requirements in the EU.

Recommendations for Financial Institutions

  • Detecting suspicious, potentially criminal intent via onboarding, Know Your Customer (KYC) checks, and transaction monitoring is a requirement for all FIs.
  • However, what happens when an FI itself facilitates and profits from financial crime?
  • Banks and other regulated entities must demonstrate effective AML frameworks and show greater commitment to supplying the right training and tools to their employees for the prevention of money laundering.

Solution

Fenergo Client Lifecycle Management (CLM) provides regulated firms with a 360-degree client view to improve risk management processes and reduce silos. The solution digitally orchestrates client journeys through every stage of the client lifecycle, from initial client onboarding and KYC to ongoing transaction monitoring and perpetual KYC reviews.

Recent Developments

In 2023, Lithuanian authorities issued €2.4 million in enforcement fines to financial institutions for non-compliance with AML regulations, a huge uptick in activity that Lithuanian-based FIs, particularly payments providers, should take note of.