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The Baltic country’s increasingly strict oversight of the payments industry has continued with more firms being publicly censured by the regulator.
Verified Payments and Via Payments have both been slapped with a fine by the Financial Market Supervision Committee at the Bank of Lithuania.
This follows fines imposed on two other electronic money institutions last month.
According to the central bank, a fine and obligation were imposed on Verified Payments after an inspection was conducted on the electronic money institution.
During the inspection, shortcomings were identified in connection with the implementation of the institution's internal control system for money laundering and terrorist financing controls, conflicts of interest and control of intermediaries.
The regulator noted that know your customer (KYC) procedures established by the institution did not allow for an adequate understanding of the purpose and nature of the client business relationships.
Verified Payments had improperly applied enhanced customer identification measures to high-risk customers, especially when determining the source of their assets and funds, as well as the identities of virtual currency exchange operators and customers related to gambling operations.
The Bank of Lithuania assessed the circumstances and fined the firm €110,000.
In addition, the institution is obliged no later than October 31 this year to eliminate violations and shortcomings of legal acts, and by the end of January 2024 to provide the audit firm's conclusion certifying this.
Via Payments, meanwhile, was fined for deficiencies in its business continuity procedures, including failing to adhere to the law which dictates that a financial institution must establish business continuity management processes to ensure uninterrupted operations in the event of serious disruptions.
The Bank of Lithuania found that the e-money institution did not properly conduct an analysis of the impact on its activity and that ultimately the institution's business continuity plan and testing process were flawed.
For this, Via Payments has been fined €70,000.
The Bank of Lithuania also found that Via Payments had failed to meet compliance requirements regarding client funds.
It had not established appropriate internal control procedures, and how and when the balances of client funds in bank accounts should be reconciled.
For a short period of time, for example, the institution did not ensure the fulfilment of the requirements for the protection of clients' funds.
Between December 2021 and March 2022, Via Payments’ quarterly balance sheets submitted to the Bank of Lithuania contained incorrect information about customer funds balances.
It also did not have a compliant information and communication technology (ICT) strategy for some time, and its subsequent approved strategy had shortcomings. In addition, it did not comply with the requirements for ICT resource registers.
However, the regulator has confirmed that Via Payments has now submitted the conclusion of an independent evaluation, finding that the violations have been substantially corrected.
The latest action from the Bank of Lithuania comes after an array of reports and press releases suggesting that it wants the large fintech industry in the country to mature, as opposed to just expanding.
The issues at stake also fall in line with concerns throughout Europe.
Ireland, the Netherlands and the UK have publicly called out the payments and electronic money sector more broadly about where their failings are, such as when it comes to governance and financial crime controls.
