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The Bank of Lithuania’s board has decided to revoke Neocard’s e-money licence over breaches of compliance requirements.
Neocard has informed customers that it can no longer supply payment services after having its licence revoked. The central bank said it made the decision due to significant, repeated, systemic and prolonged breaches of regulations.
The regulator even found that Neocard obstructed its inspection efforts by providing fraudulently manipulated documents and supplying incorrect information regarding the value of payment services rendered.
Consequently, the institution, which had not responded to Vixio’s request for comment at the time of publication, is no longer permitted to offer any financial services and is obliged to return all funds to its clients.
During the assessment period, Neocard, which marketed itself as being able to “make your idea a reality” on its website, had failed to establish effective internal controls to prevent money laundering and the financing of terrorism.
Conflicts of interest within the institution were inadequately managed, with instances where clients were found to have connections to the institution's shareholders.
The Bank of Lithuania said that the institution's employees merely conducted formal monitoring of business relations with these clients, neglecting to analyse their activities thoroughly, including the purpose and sources of their financial transactions.
Moreover, the institution was accused of lacking sufficient internal procedures for identifying and verifying customers and beneficiaries.
According to the central bank, it frequently failed to ascertain the identities of clients, and the nature of their business relationships. It also neglected to verify information about their beneficiaries from reliable sources before initiating business dealings.
Neocard lacked adequate procedures for monitoring client transactions, failing to meet regulatory requirements for effective and continuous surveillance. The institution's monitoring systems were found to be ineffective in identifying suspicious transactions promptly, and investigations into such activities were either not conducted or done superficially.
Meanwhile, the majority of clients examined during the inspection were found to have significant monitoring deficiencies, constituting a substantial portion of the institution's turnover.
Despite focusing on serving high-risk clients, the central bank said that Neocard did not consistently implement enhanced due diligence measures, and failed to halt suspicious transactions and/or take appropriate action to clarify doubts about complex or large transactions.
Furthermore, the institution's internal policies and controls regarding international sanctions and restrictive measures were found to be severely lacking.
For example, Neocard did not have mechanisms to verify whether clients, their representatives or beneficiaries were subject to international sanctions, nor did it check whether sanctioned financial institutions were involved in payment operations.
