Lithuania

CENTRAL AUTHORITY FOR REPORTING

The mission of the Financial Crime Investigation Service (the “FCIS”) is to protect the financial system of the State, ensure the disclosure, investigation and prevention of crimes and other offences against the financial system as well as related crimes and other offences.The mission of the Financial Crime Investigation Service (the “FCIS”) is to protect the financial system of the State, ensure the disclosure, investigation and prevention of crimes and other offences against the financial system as well as related crimes and other offences.

ANTI-MONEY LAUNDERING REGULATOR(S)

• Financial Crime Investigation Service
• Bank of Lithuania
• Lithuanian Bar Association

In addition to the aforementioned entities, the Law on the Prevention of Money Laundering and Terrorist Financing lists other entities which are given specific regulatory responsibilities under such Act in certain concrete areas.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

The Third Directive was fully implemented in Lithuania by the Law on the Prevention of Money Laundering and Terrorist Financing, which entered into force on 17 January 2008.

The new law enhances the procedures for client identification and verification and increases the list of institutions that are responsible for the prevention of money laundering and terrorist financing, extending the competence of those institutions.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS

The laws concerning the anti-money laundering that are applicable to lawyers include the following:

• Law on the Prevention of Money Laundering and Terrorist Financing (the “Act”);
• Law on the Financial Crime Investigation Service;
• Law on the Bar;
• Rules on the prevention of money laundering (adopted by the Bar Association, applicable since 1 January 2008);
• Instructions for providing the Financial Crime Investigation Service with information on suspicious financial operations and transactions;
• Instructions on the identification of the client or linked financial operations, and on the submission of information about financial operations and transactions.

There are also other legal acts regulating other aspects of anti-money laundering that are applicable mostly to the financial institutions, including suspicion operations and clients, rules for administrating registers, etc.).

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

The provisions on anti money laundering are applicable to advocates and advocates’ assistants (an advocate's assistant is a natural person entered in the list of Lithuanian advocates’ assistants in accordance with the procedure and requirements laid down in the laws, who assist in the advocate’s practice), when they are acting on behalf of and for the client and when assisting the client in the planning or execution of transactions involving the buying or selling of real property or business entities, managing of client money, securities or other assets, opening or management of bank, savings or securities accounts, organisation of contributions necessary for the creation, transaction or management of companies or trusts, and/or similar structures.

A lawyer from an EU member state who arrives to Lithuania under the right of free movement of workers and provides services here is under an obligation to act according to the laws and legal acts of the Republic of Lithuania (and also according to the laws of his/her EU member state). In the event of failure to fulfil his/her duties, the EU member state lawyer would be liable for his actions, and possibly subject to disciplinary punishment by the Lithuanian Bar Association.

Moreover, financial institutions must inform the Financial Crime Investigation Service when a client is from a foreign state and is engaged in the provision of legal advice or is a practicing advocate, even if its activities would be characterised by large-scale ongoing permanent and regular monetary transactions (in any other case, the fact that the nature of the client’s relationship with the financial institution involves large-scale ongoing permanent and regular monetary transactions would exempt the financial institution from any requirement to submit information on the client to the Financial Crime Investigation service).

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE

Rules on the prevention of money laundering, adopted by the Lithuanian Bar Association and applicable since 1 January 2008.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

The Lithuanian Bar Association shall approve instructions for advocates and advocates’ assistants aimed at preventing money laundering and/or terrorist financing, shall supervise the activities of advocates and advocates’ assistants and shall consult advocates and advocates’ assistants on issues relating to the implementation of any such instructions.

The Advocate council (the council of the Lithuanian Bar, which is the managing body of the Lithuanian Bar Association) is responsible for coordinating and implementing the measures and obligations of money laundering in the name of the Lithuanian Bar Association. It shall appoint an officer who can prescribe in writing obligatory measures to be followed by any advocate or advocate’s assistant.

Advocates or advocates’ assistants, when they suspect that the transaction concluded by their client may be linked to money laundering and/or terrorist financing, must submit the data confirming the client’s identity and other information specified in the Act to the Lithuanian Bar Association immediately after the conclusion of the transaction, regardless of the amount of money received or paid by the client under the transaction.

The Lithuanian Bar Association must keep a register of suspicious transaction reports filed by advocates and advocates’ assistants. It shall guarantee the safety of the register and data from destruction, modification or unlawful usage. The Financial Crime Investigation Service is responsible for inspecting the administration of the register.

The Lithuanian Bar Association shall approve and coordinate with the Financial Crime Investigation Service the criteria for determining whether a transaction should be deemed suspicious (not approved yet).

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS

The advocates and advocates’ assistants are obliged under the Act to indentify the client and the beneficial owner, unless expressly exempted from doing so under the Act:

1. When establishing a business relationship;
2. When carrying out monetary operations or concluding transactions amounting to more than EUR 15,000 or the corresponding amount in foreign currency, whether the operation is carried out in a single transaction or in several transactions which appear to be linked, except in cases when the client’s and beneficial owner’s identity has already been established;
3. When exchanging cash, when the amount exchanged exceeds EUR 6 000 or the corresponding amount in foreign currency;
4. Performing internal and international remittance transfer services, when the sum of money sent or received exceeds EUR 600 or the corresponding amount in foreign currency;
5. When there are doubts about the veracity or authenticity of previously obtained client or beneficial owners’ identification data;
6. In any other case when there are suspicions that the activities of money laundering and/or terrorist financing is, has been or will be performed.

In addition, advocates and advocates’ assistants must take all corresponding and proportionate measures in order to establish whether the client is operating on his own behalf or whether he/she is controlled and to establish the beneficial owner. It shall be prohibited to perform the operations in 1 to 4 above, if the client does not submit the documents confirming his identity, if the client submits incomplete data or if the data is incorrect, or if the client or his representative avoids submitting the data required for establishing his/her identity, conceals the identity of the beneficial owner or avoids submitting the information required for establishing the identity of the beneficial owner or the submitted data is insufficient for doing so.

In all cases where the identity of the client and the beneficial owner is established, information about the purpose of the client’s business relationship and its intended character shall also be obtained and the client’s and beneficial owner’s identity verified from a reliable and independent source. In all cases, advocates and advocates’ assistants shall perform ongoing monitoring of the business relationship.

Advocates and advocates’ assistants are prohibited from notifying the client or other persons that they have submitted a suspicious transaction report on such client to the Financial Crime Investigation Service. The prohibition shall not cover the advocates and advocates’ assistants, when they attempt to convince the client not to pursue illegitimate activity.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes, a risk-based approach should be applied to determinate the beneficial owner of the transaction or the operation, to verify information, to perform ongoing monitoring, and to collect information about client business relations. These requirements apply to lawyers, unless they are specifically excluded from certain obligations.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

The enhanced client due diligence measures shall be performed:

1. When the transactions or business relationships are performed through a representative or the client does not verify his/her identity;
2. When a cross-border correspondent banking relationship is performed with third country credit institutions;
3. When transactions or business relationships are performed with politically exposed natural persons (PEP); and
4. Where there is a great threat of money laundering and/or terrorist financing.

When applying client due diligence in cases 1 and 4 mentioned above, the lawyer must apply one or more of the following:

1. Use additional data, documents and information for verification of the client’s identity;
2. Use additional measures to verify or confirm the submitted documents, such as having the client submit a certificate confirming the data; and
3. Guarantee that the first payment is made through an account opened in the client’s name in a credit institution.

In the case of a PEP, the lawyer must receive the approval of his/her authorised manager to conduct a business relationship with any such client; establish the source of property and funds connected with the proposed business relationship or transaction with the PEP; and perform enhanced ongoing monitoring of the PEP.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Simplified verification of the client’s identity shall be carried out:

1. For companies, trading in whose securities has been allowed in the regulated markets of one or more EU member states;
2. In the case of joint accounts managed by notaries and other persons providing legal services from EU member states or from other states to beneficial owners, if the requirements of combating money laundering are applied and followed;
3. In the case of life insurance contracts when the annual payment does not exceed EUR 1000 or any one-time payment is not more than EUR 2 500 or the corresponding amount in foreign currency;
4. In the case of pension programme insurance certificates, if there is no provision concerning their pre-term termination and if the insurance certificates cannot be used as objects of pledge;
5. In the case of pensions, old-age pensions or other systems that provide for pensions to employees, when payments are withdrawn at source and the legal acts regulating the functioning of any such pension systems do not allow for the transfer to another person of any share of the pension system member;
6. In the case of E-Money, when electronic media cannot be supplemented, and the largest amount kept in the media does not exceed EUR 150 or if the electronic media may be supplemented but the total value of transactions performed in any one calendar year is subject to an overall limit of EUR 2 500, except in the case where in the same calendar year the holder of electronic media withdraws EUR 1 000 or more;
7. If the client is a financial institution covered by the Law on the Prevention of Money Laundering and Terrorist Financing; and
8. For the client which/who poses a small threat of money laundering and/or terrorist financing (the criteria of small threat are still in draft articles).

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Yes. When identifying or verifying the identity of a client and beneficial owner without his/her direct participation, a lawyer may use information obtained from financial institutions and other entities or their representations abroad, when they comply with certain requirements set forth in the Act for third party reliance.

When requested, any third parties relied upon for due diligence must immediately submit to the requesting party all information and data that they obtained when originally identifying the client or beneficial owner. Liability for CDD shall rest with the party that has relied upon any third party information.

These provisions do not cover outsourcing, intermediary activities and representation, if under contract the provider of the outsourcing services, the intermediary or the representative is to be considered a part of the entity (legal person).

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

When advocates or advocates’ assistants suspect that a transaction concluded by their client may be linked to money laundering or terrorist financing, they must submit all client identification documentation to the Lithuanian Bar Association immediately after the conclusion of the transaction. Within no more than 3 working hours of receipt, the Lithuanian Bar Association must transmit that information to the Financial Crime Investigation Service.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

The reporting requirements are not applicable when advocates or advocates’ assistants assess their client’s legal position, or defend their client, or represent him/her in the legal process. Nor do they apply to consultations provided in preparation for commencement or avoidance of the legal process.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

An advocate shall not be identified with his clients or cases. An advocate may not be summoned as a witness or to give explanations as to the circumstances which came to his knowledge in the pursuit of his professional activities. It is also prohibited to examine, inspect or take an advocate’s work product or files containing information related to his/her professional activities, examine postal items, wiretap telephone conversations, control any other information transmitted over telecommunications networks and other communications or actions, except when the advocate is suspected or accused of a criminal offence. In any such case, only those documents related to the allegations or charges made against the advocate shall be seized. It is prohibited to examine, overtly or covertly, any information comprising the advocate’s professional secret and use it as evidence. The Lithuanian Bar Association must be notified when an advocate has become a suspect or a defendant or procedural actions have been taken.

An advocate who reported a suspicious transaction to the Lithuanian Bar Association has the same general rights mentioned above. An advocate is not liable for his client’s money laundering activities unless he/she is involved in it himself.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Lawyers can proceed with the transaction or advice without any consent of the authorities.
Advocates and advocates’ assistants are not obliged to suspend suspicious or unusual monetary operations or transactions and are also not obliged to follow the instructions of the Financial Crime Investigation Service to that end.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

Yes, a lawyer must not inform a client that information has been submitted to the Financial Crime Investigation Service. However, the prohibition does not apply to lawyers “when they attempt to convince the client not to pursue unlawful activity.”

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

An advocate or advocate’s assistant shall identify a new client before providing legal services. If the client or the transaction is suspicious, the advocate or the advocate’s assistant shall submit the required information to the Lithuanian Bar Association, as described above.

The general grounds for an advocate and advocate’s assistant to refuse to provide legal services are provided for in the Law on the Bar (significant reasons include breach of the principles of the advocate’s practice, if the advocate is too busy on other matters, and lack of expertise in the transaction at hand).

There are no other restrictions on the acceptance of a new client.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

Lawyers must take all measures to identify the client and the beneficial owner including when there are doubts about the veracity or authenticity of previously obtained client or beneficial owners’ identification data and when there are suspicions that money laundering and/or terrorist financing is, has been or will be performed.

Lawyers must perform ongoing monitoring of a client’s business relationship, including investigating transactions undertaken during such relationship, seeking to ensure that the transactions correspond to the information possessed by financial institutions or other entities about the client, its business and the type of risk, and, as necessary, information about the source of funds.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION

Not applicable.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

No such cases are known at present.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

The third round evaluation of Lithuania by MONEYVAL took place on 8-14 January 2006 and recommendations concerning lawyers were provided regarding:

• Client due diligence (CDD) and record keeping R.12 (There is a need to address CDD including identification issues, the provision of a legal basis to certain key elements of the identification process, and the timing and basis of applicability of the process; politically exposed persons are not addressed through legal provisions and hence there is no awareness within some sectors of the designated non financial business and professions; more awareness of the threats arising from technological developments and large complex transactions are needed);
• Suspicious transaction reporting R.16 (There is a need to clarify the definition of a “financial operation” as opposed to that of a “transaction” in relation to reporting and exceptions to reporting in anti-money laundering laws applicable to the legal profession. There are no direct obligations to file reports of suspicion transactions related or linked to the financing of terrorism. There is also a need to develop and implement internal controls and to establish legal or other mandatory obligations for designated non-financial business and professions to pay special attention to relationships and transactions with non compliant countries);
• Regulation, supervising and monitoring R.24-25 (Although various guidance and instructions have been issued to the various sectors, there are inconsistencies and inexplicabilities and no legal guidance has been issued to the legal profession);
• Other non-financial business and profession/Modern secure transaction techniques (R.20) (FATF welcomed the Lithuanian initiative to protect non-financial businesses and professions from being misused for money laundering. The intensification of the drive to reduce the use of cash and develop further electronic settlements could be considered further).

On 4 March 2008, Lithuania provided MONEYVAL with a written progress report. Since the last evaluation, practical changes were implemented with regard to client due diligence procedures and politically exposed persons; systematic education was provided to commercial banks by the Financial Crime Investigation Service on money laundering and financing of terrorism; and some new and amended laws were proposed to implement the recommendations.

Information provided by:

Laimonas Marcinkevicius
Managing partner
Law Firm Marcinkevicius, Caikovski & Partners JURIDICON
Lithuania