Banks bring institutions and experts together to combat money laundering
Following the money laundering scandals in the Baltic region, financial and credit institutions that belong to the Association of Lithuanian Banks took the initiative to develop common guidelines of good practice for customer due diligence. The document, unique among the surrounding countries, is the result of close work by the bank association’s members with the Financial Crime Investigation Service, the Bank of Lithuania, and legal experts. The guidelines aim to harmonize the preventive measures that market participants take while making the processes clear and simple for users of financial services.
The guidelines address the issue at the core of preventing money laundering and terrorist financing – proper customer identification. It complies with all relevant legal acts of the European Union and Lithuania as well as the guidelines of the Financial Action Task Force on Money Laundering. The practices it sets out are mandatory for banks, credit unions and specialized banks that belong to the Association of Lithuanian Banks.
“The threat of money laundering and terrorist financing is leading the financial sector to combine efforts and know-how not only to fight but also to prevent such things. The new guidelines represent a shared commitment by the members of the bank association to follow best practices in this area. It will have a long-term impact on the market,” stresses Vytautas Danta, the chairman of the working group to develop the guidelines and head of the association’s compliance committee, adding: “This will also strengthen the sector's transparency and reputation, letting international partners assess the measures taken by financial institutions operating in Lithuania. Moreover, having a smooth and fast process with clear and understandable rules is critical, since the prevention of money laundering is very important, but those procedures should not be an obstacle to normal communication between the bank and the customer.”
“The Bank of Lithuania is pleased that banks are taking transparency requirements seriously and applying self-regulation in the interests of the entire financial system of the country. That is important for improving the image of Lithuania worldwide. In recent times, the Bank of Lithuania has given a lot of attention to the topic of strengthening money laundering prevention and we see that those efforts are bearing real fruit,” says Jekaterina Govina, the head of the Supervision Service at the central bank.
"We see that financial institutions are showing initiative and actively participating in the prevention of money laundering. The unified guidelines which has been created will help them get to know customers better, and the unified attitude and practices among all market participants will contribute to faster identification of threats and will increase transparency in the market,” says Mindaugas Petrauskas, the deputy director of Lithuania’s Financial Crime Investigation Service.
Banks operating in Lithuania have approximately 3 million customers – that is the number of individuals and legal entities that have accounts with financial institutions and use other bank services. Financial institutions are required by law to collect information about their customers and ensure it is up to date.
The guidelines detail the steps a financial institution must take to identify a customer, whether a natural or legal person, and to collect and update information about them. The document also outlines the legal basis for the procedures and possible technological solutions such as remote authentication.
Banks and other financial institutions are obliged to know their customers in keeping with the applicable legal acts. Currently, the main tool financial institutions use for that is a questionnaire with key customer information, which each customer is asked to update on a regular basis. Customers may also update the information on their own initiative if important details change, like their name or surname, place of work, data on the amount of operations performed, and so on.
As changes are made to legislation, the document detailing the guidelines will be supplemented and updated.