Draft Instructions for AML and International Sanctions for Financial Market Participants in Lithuania

Instructions aimed at preventing money laundering and/or terrorist financing

The Bank of Lithuania has issued Draft instructions for financial market participants aimed at preventing money laundering and terrorist financing. The Draft instructions introduce the requirement for market participants to inform the Bank of Lithuania of the appointed board member responsible for AML/CTF and MLRO in 7 business days and provide specific requirements for the internal control system assessment. Crowdfunding operators will also have to follow the Draft instructions.

The first changes will come into force on 01/05/2023, and financial market participants will have to:

1. Assess the internal control system’s elements– effectiveness, efficiency, and compliance with legal regulations. The internal control elements and the system must be assessed at least once per two years by conducting an internal or external audit or other methods chosen by the financial market participant.

2. Inform the Bank of Lithuania about appointing the board member responsible for AML/CTF and MLRO in 7 business days. 3. Follow EBA guidelines on the role and responsibilities of the AML/CFT Compliance Officer EBA/GL/2022/05

Starting from 10/11/2023, crowdfunding operators will also have to follow the instructions. Previously, they did not have to.

According to the Draft instructions, the internal control system audit must be documented and include the following information:

• the scope of the audit (i.e., distinguishing the areas, processes, etc.)
• the audited period
• the audit methodology
• policies and internal control procedures that audited and their assessment
• customer testing scope and testing selection criteria, indicating what customer information evaluated
• the findings rated by their nature, significance and potential impact
• audit recommendations
• other relevant information.

Instructions on the implementation of international sanctions

The Bank of Lithuania has issued Draft instructions for financial market participants on implementing international financial sanctions.

Draft instructions, introduce the mandatory role of the Committee of Audit / Supervisory board, provides directions on the performance of sanctions risk assessment, give guidance on screening and determining the risk of sanctions evasion regarding the institution’s customers, transactions, partners, intermediaries, service providers, shareholders and managing personnel, requests for allocation and separation of duties, annual audit or another type of checks on the sufficiency, effectiveness and efficiency of used systems.

According to the Draft instructions, financial market participants must perform an annual and ad-hoc enterprise-wide sanctions risk assessment. The financial market participants assess their operational risk, customers’ risk, and proliferation financing risk. The enterprise-wide sanctions risk assessment may identify increased-risk situations, which must draft a risk remediation plan and the responsible person assigned. The sanctions risk assessment may be carried out as part of enterprise-wide money laundering and terrorist financing risk assessment or separately. There has yet to be a date when the Draft instructions come into force.

The Draft instructions also introduce specific requirements for financial market participant’s policies and procedures, which will need to include the following:

• Annual and ad-hoc reviews of policies and procedures.
• Risk assessment, monitoring, evaluation, and management.
• Decision-making procedure on identified sanctions violations.
• Reporting to competent authorities.
• Process for appointing the person responsible for organising the implementation of sanctions.
• Roles and responsibilities.
• Staff training.
• Sanctions screening.
• Audit.

We recommend preparing for the Draft instructions’ implementation in advance before it comes into force, as it contains the Bank of Lithuania’s position on how financial market participants should comply with international sanctions. In addition, the period during which it is necessary to implement the requirements indicated in the legal regulation usually is too short and insufficient for financial market participants to prepare for.

As your legal advisors we will be happy to assist you regarding all the questions related to proposed changes in regulation, including legal advice as well as revision and preparation of your internal documents.