The Bank of Lithuania has introduced a draft resolution amending Resolution No. 247 (Draft Resolution) and proposing significant updates to the management system of electronic money institutions and payment institutions (collectively referred to as “Institutions”). The amendments address common operational deficiencies and align practices with evolving legislative requirements.
Key Updates in the Draft Resolution
The Draft Resolution introduces the following essential changes:
1. Governance Improvements:
- The delegation of supervisory functions to the general meeting of shareholders will no longer be permitted.
- Institutions must set detailed measures to manage conflicts of interest effectively.
2. Control and Compliance Enhancements:
- Institutions must designate individuals responsible for monitoring, controlling, and ensuring compliance with safeguarding client funds and capital requirements. While one person may assume multiple control functions, their responsibilities must be clearly defined.
- Control function leaders must actively participate in decision-making related to their areas of oversight and ensure robust information sharing and cooperation.
- Employees or institution-appointed individuals must fill certain control function roles requiring continuous daily involvement.
3. Improved Intermediary Oversight:
- Detailed requirements for selecting, monitoring, and controlling intermediaries will be introduced.
4. Internal Audit and Risk Culture:
- Strengthened requirements aim to ensure the independence and effectiveness of internal audits.
- Risk culture and governance will be further reinforced within Institutions.
5. Winding-Up Plans:
- Detailed requirements for termination plans related to electronic money issuance or payment services will be effective on April 9, 2025.
6. Client Fund Safeguarding:
- Clarified and supplemented requirements for safeguarding clients’ funds to ensure robust compliance with regulatory standards.
Implementation Timeline
The provisions outlined in the Draft Resolution will be phased in:
- Winding-up plan requirements: April 9, 2025.
- Remaining provisions: May 1, 2025, with exceptions as specified in the Draft Resolution.
To meet these deadlines, institutions must review and update their internal documentation, reconsider processes, and ensure compliance with the updated legal framework.
Recommendations of ECOVIS ProvnetusLaw
The proposed changes underscore the importance of robust governance, compliance, and risk management in the financial sector. ECOVIS ProventusLaw strongly recommends Institutions take proactive steps to:
- Be prepared to review current governance structures and align them with the new requirements.
- Designate appropriate personnel for compliance and control roles to meet daily operational needs.
- Revise internal audit processes to enhance independence and effectiveness.
- Prepare comprehensive winding-up plans in advance of the April 2025 deadline.
Our team of experienced lawyers is ready to assist Institutions in adapting to the upcoming requirements. We offer tailored guidance on regulatory compliance, internal control systems, and safeguarding of client funds to help ensure a seamless transition to the proposed legal framework.
For more details or assistance, reach out to ECOVIS ProventusLaw experts today.