1 9 Socialización primaria, secundaria, terciaria
1.10. El lenguaje y el mantenimiento de la realidad
2MLD was implemented in Lithuania by amending the 1997 Law on Prevention of Money Laundering, which remains the most important legal act on money laundering
prevention201 (the Law on Prevention of Money Laundering). The Law on Financial
Institutions202 also plays an important role, as it provides the definitions of credit and
financial institutions, as well as the territorial scope provisions.
The Government has also issued a number of resolutions providing further necessary guidance. The Government has issued new wording for the detailed criteria for the recognition of suspicious transactions,203 as well as rules on suspension and reporting of
suspicious transactions.204 The Government has provided comprehensive procedural
rules for the identification of a client and several related monetary operations.205 The
*This chapter has been written by Giedrius Stasevicius and Simona Balciunaite of Lideika, Petrauskas, Valiunas and partners LAWIN, Vilnius.
200 No VIII-275, Published: Official Gazette (Valstybės Žinios) 1997, No.64-1502.
201 dated 19 June 1997 No VIII-275, new wording of the Law adopted on 25 November 2003, as amended
on 27 April 2004 (Published: Official Gazette (Valstybės Žinios), 2003, No 117-5318)
202 The Law on Financial Institutions dated 10 September 2002, (Published: Official Gazette (Valstybės
Žinios) 2002, No. 91-3891).
203 Criteria in Observance Whereof a Monetary Operation is Considered Suspicious, dated 06 September
2002, approved by the Resolution of the Government of the Republic of Lithuania No. 1411 (Published: Official Gazette (Valstybės Žinios), 2002, No. 89-3802);
204 Rules of Suspension of Suspicious Monetary Operations and Communication of Information to the
Financial Crime Investigation Service under the Ministry of the Interior dated 15 November 2004, approved by the Resolution of the Government of the Republic of Lithuania No. 1441 (Published: Official Gazette (Valstybės Žinios) 2004, No. 167-612).
205 On the Procedure for Identifying the Customer and Several Related Monetary Operations, for
Communicating Information on Monetary Operations or Transactions, and for Controlling Cash Incoming to or Outgoing from the Republic of Lithuania dated 03 December 1997, approved by the Resolution of the Government of the Republic of Lithuania No. 1331, new wording adopted on 22 July 2004 (Published: Official Gazette (Valstybės Žinios) 1997, No. 112-2840).
details of the register of monetary operations and transactions kept in accordance with Article 4 of 2MLD have been specified in another Government resolution.206
Collectively, the above legal acts constitute the implementing legislation in Lithuania. They define the persons and institutions affected, establish requirements to be followed aimed at money laundering prevention and set up the institutional framework for combating money laundering.
7.3 Institution Covered
The following persons and institutions are covered by the Lithuanian implementing legislation:
7.3.1 Financial institutions
Credit institutions207 and financial enterprises are defined in the Law on Financial
Institutions. A financial institution is a Lithuanian undertaking or a branch of a foreign state undertaking carrying on business in the Republic of Lithuania, engaged in the provision of one or more of the following financial services:
• receipt of deposits and other repayable funds; • lending (including mortgage loans);
• financial leasing;
• money transfer;
• issuance of payment cards and other means of payment and/or carrying out of operations therewith;
• provision of financial sureties and financial guarantees;
• conclusion of transactions, at one’s own or a client’s expense, on the money market instruments (cheques, bills, deposit certificates, etc.), foreign currency, financial future and option transactions, the establishment of a currency exchange rate and interest rate, public securities and precious metals;
• investment services;
• financial mediation; • money broking;
• provision of information and advice on credit; • safe deposit facilities;
• currency exchange (in cash);
• settlement of payments between credit institutions (clearing); • safekeeping and administration of securities;
• provision of advice to undertakings on the capital structure, production strategy and related issues, as well as the advice and services related to reorganisation, restructuring and purchase of the undertakings;
206 Resolution of the Government of the Republic of Lithuania No 1409 on concerning the Rules to Arrange
the Register of the Monetary Operations and Transactions Conducted by the Client dated 06 September 2002, approved by the Resolution of the Government of the Republic of Lithuania No. 1409, new wording adopted on 22 July 2004 (published: Official Gazette (Valstybės Žinios) 200, No. 115-4304).
• provision of the services related to securities issues; • issuance and administering of electronic money;
• administration of investment funds or investment companies with variable capital; • insurance companies and insurance broker companies;
• investment companies with variable capital;
• management companies;208
• providers of postal services who provide services of domestic and international money transfers;
• providers of postal services of domestic and international money transfers. In order to provide any of the postal services specified in the Law on Post of the Republic of Lithuania, authorisation from the Communications Regulatory Authority of the Republic of Lithuania is required.209
An entity is considered a financial institution if the documents regulating its activity (statutes, licences, etc.) state that it provides financial services and such services constitute the principal part of its activities. Certain financial services require a banking or financial brokerage licence.
The legislation implementing 1 and 2MLD is also applicable to the subsidiaries/branches of banks and financial institutions from other Member States operating and providing financial services in Lithuania. In the case of Lithuanian banks and financial institutions providing services in other EU Member States through branches/subsidiaries, it is our view that the appropriate legislation of that Member State would be applicable, even though this is not expressly provided for under Lithuanian law.
7.3.2 Professionals
Advocates and advocates’ assistants
According to Lithuanian Law on Advocacy, an advocate is a lawyer admitted to the Lithuanian Bar. An advocate’s assistant is a lawyer enrolled into the list of advocates’ assistants and preparing for the activity of advocates.
Advocates and advocates’ assistants are covered by the implementing legislation when they are acting on behalf of a client or representing him in financial or immovable property transactions, or providing assistance in planning and concluding their clients’ transactions relating to purchase and sale of immovable property, companies or rights, management of the financial resources, securities or any other property of their clients, opening and management of bank, savings or securities accounts, the creation, operation or management of undertakings, and administration of contributions to capital of companies.
208 According to the Law on Collective Investment of the Republic of Lithuania, Management Company
means any company, the regular business of which is management of unit trusts/common funds or of companies with variable capital.
209 Postal law of the Republic of Lithuania No. VIII-1141, dated 15 April 1999, new wording adopted on 13
Other lawyers, who are not admitted to the Bar, are not bound by the Lithuanian Law on Prevention of Money Laundering, even if they practise law and provide legal advice to clients on terms similar to advocates. We would, therefore, conclude that the application of 2MLD was narrowed in Lithuania by excluding lawyers that are not advocates or advocates’ assistants from the list of persons covered.
In fact, the lawyers who are not admitted to the Lithuanian Bar (including foreign lawyers) can provide in Lithuania all the services listed in Article 2a (5) of the Directive without restrictions. The exclusive powers of advocates or advocates’ assistants are basically limited to representation of clients in courts (also with some exceptions).
Lawyers from other EU Member States may become Lithuanian advocates by registering with the Lithuanian Bar Association procedure, if they intend to practise on a permanent basis.
Notaries
This category includes notaries and persons licensed to perform notarial acts as specified in the Law on the Notary Office of the Republic of Lithuania.210
Accountants and Tax advisers
In Lithuanian implementing legislation, accounting undertakings are defined as Lithuanian companies or Lithuanian branches or representative offices of foreign companies whose principal activity is the provision of accounting or tax advice services.
Auditors
Auditors are defined as certified auditors in the Law on Audit of the Republic of Lithuania.211 A certified auditor is a person, who meets the requirements set by the Law
on Auditors, holds the auditor’s certificate and is a member of the Chamber of Auditors (a public legal person uniting all auditors and implementing the auditors’ self- governance). The auditor may perform audit only if he is a sole practitioner, a partner of a general partnership or a limited partnership, or an employee of an audit firm.
7.3.3 Others
Dealers in high value goods and real estate
These are persons engaged in economic activities related to trade in real estate, precious stones, precious metals, works of art, antiques and other property the value of which is in excess of LTL50,000212 or an equivalent sum in foreign currency where
payment is made in cash.
210 Law on the Notary Office of the Republic of Lithuania No. I-2882 (Published: Official Gazette (Valstybės
Žinios) 1997, No. 28-810, new wording adopted on 22 November 2005. (Authentication of transactions
(agreements, wills, powers of attorney etc.), issue of certificates of the right of inheritance, confirmation of the authenticity of copies of documents and their extracts etc.)
211 Law on Audit of the Republic of Lithuania No. I-1169, dated 15 June 1999, new wording adopted on 28
April 2004 (Published: Official Gazette (Valstybės Žinios) 2004, No. 63-2242).
212 Approximately €14,500. The LTL – (Lithuanian Litas) is pegged to the euro by law at a rate of 3.4528
Gambling companies
According to the Law on Gambling of the Republic of Lithuania213 gambling can be
carried on by lawfully established public and private limited liability companies which have obtained a licence to carry out this activity and permits to open gambling machine halls, bingo halls and gambling establishments (casinos) or when the State Gambling Control Commission of the Republic of Lithuania approves lottery or betting regulations. In our view, the list of persons covered by Lithuanian money laundering legislation corresponds to the list covered by 2MLD, with the exception of lawyers, which is discussed below.
7.4 Identification of Customers
2MLD requires Member States to ensure that the financial institutions and persons covered by the directive operating in their territory identify their customers by means of supporting evidence when entering into certain transactions, especially when opening accounts or when offering safe custody services.
This requirement is fully implemented in Lithuania by Article 10 of the Law on Prevention of Money Laundering: financial institutions and other entities, when opening bank accounts, accepting deposits, providing services of safe custody for valuables or when concluding agreements with their customers, must identify the customer in the physical presence of the customer or his/her agent.
Financial institutions and other entities must also identify the customer when performing a single or several related financial operations or when entering into transactions which exceed LTL50,000 (approx €14,493) or its equivalent in foreign currency. The exception applies when the customer has already been identified, in which case face-to-face identification is not required.
If during the financial operation the final amount is not known, the financial institution must identify the customer as soon as it becomes clear that the amount involved exceeds LTL50,000 (approx €14,493). In case of several related financial operations the customer must be identified immediately after establishing that the operations are related. Financial institutions are in any case prohibited from opening anonymous accounts.
Life-assurance undertakings must identify the customer and the insured person when the annual single premium payable by the customer is in excess of LTL8,500 (approx €2,464) or payable periodic premiums are in excess of LTL3,500 (approx €1,014.5) or its equivalent in foreign currency.
Gambling companies must also identify their customer if he/she exchanges cash into gambling chips, pays or wins a sum that exceeds LTL3,500 (approx €1,014.5) or its equivalent in foreign currency.
213 Law on Gambling of the Republic of Lithuania No. IX-325, dated 17 May 2001 (Published: Official
7.4.1 Verification of identity
When identifying the customer, a financial institution or other entity must ask the customer to produce identification documents containing at least the following information:
• if the customer is a natural person - name and family name, personal code,214 date of
birth, number, place and date of the issuance of passport or equivalent travel document. If the person is a foreign national residing in Lithuania or a foreign state - the number, the place and the period of validity of the residence permit or a valid visa or a stamp certifying the most recent crossing of the border of the Lithuanian Republic;
• if the customer is a legal person registered in Lithuania, or a branch of a foreign company, the document must contain at least the name, legal form, address, company code, the number and the date of issue of the registration certificate;
• if the customer is a foreign legal person - name, registered address, details of registration or other form of incorporation of that legal person.
7.4.2 Non face-to-face business
2MLD imposes an obligation on Member States to ensure that the institutions and persons subject to the Directive take specific and adequate measures necessary to compensate for the greater risk of money laundering which arises when establishing business relations or entering into a transaction with a customer who has not been physically present for identification purposes (“non face-to-face operations”).
Lithuanian law neither establishes any additional identification requirements for non face-to-face operations (including on-line and telephone business), nor imposes additional obligations on supervisory authorities. Lithuanian law in general does not provide for the possibility of non face-to-face operations with clients, which have not already been identified.
In Lithuania, banks and financial institutions, insurance undertakings and notaries are not allowed under the law to enter into business relations unless the customer or his agent is physically present. Communication by post, telephone or e-mail is routinely used once the relationship is established, but it does not substitute for the initial physical meeting with a client or his representative.
These requirements, however, are only applicable to Lithuanian financial institutions and Member State or other foreign financial institutions acting through a branch established in Lithuania. If, therefore, an internet bank duly authorised in another Member State opens an account for a Lithuanian customer, that relationship would be subject to the money laundering control of that Member State, not of Lithuania.
214 “Personal code” is a personal identification number and it does not include an address of natural person.
There is no requirement to supply an address of the natural person for the purpose of Lithuania money laundering prevention legal acts. It is, however, a common practice in Lithuania to ask for an address when entering into a business with a natural person. For example, according to Article 2.15 of the Civil Code of the Republic of Lithuania, parties to a contract have the right to choose, in writing, the domicile for the purposes of performance of the contract. Banks and most financial institutions almost always request individuals to supply an address and this is a standard of reasonableness and good practice in Lithuania.
Other categories of institutions (such as lawyers, real estate agents, dealers in high- value goods, auditors, accountants or tax advisers) are not prevented from taking on business without the physical presence of a client, and there are no separate rules applicable to them establishing procedures different from those applicable to face-to- face contact with a customer. In this regard, it is possible to view this as a deficiency in Lithuania’s implementation of 2MLD
7.4.3 Exceptions
Lithuania has not introduced any exceptions beyond those permitted in 2MLD.
7.4.4 Risk-based approach to verify identity
A risk-based approach to verification of a customer’s identity is not currently envisaged by Lithuanian legislation.
7.4.5 Identification of beneficial owners
Lithuanian Law on Prevention of Money Laundering or other implementing legislation has no requirement for identification of beneficial ownership of clients. However, following the requirement of 2MLD to take reasonable measures to obtain information as to the real identity of the persons on whose behalf the customer are acting where it is certain that the customers are not acting on their own behalf, or in the event of doubt as to whether the customers are acting on their own behalf, Lithuanian financial institutions and other entities must establish the identity of the customer and of the person on whose behalf the customer is acting. The agent must submit documents containing the above mentioned required information and details of the authorisation to act as an agent (number, date). In addition to identifying the agent, the financial institution or other entity must identify the customer represented by the agent. In such a way, the above listed information about the customer has also to be obtained by the financial institution or other entity subject to the law.
7.5 Definition of Serious Crime
The implementing legislation adopts the definition of ‘money laundering’ given in the Directive. The Law on Prevention of Money Laundering defines money laundering as the following conduct when committed intentionally:
• the conversion or transfer of property, knowing that such property is derived from criminal activity for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action;
• the concealment or disguise of the true nature, source, location, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity;
• the acquisition, possession or use of property, knowing at the time of receipt/transfer that such property was derived from criminal activity; and
• preparation or attempts to commit, and aiding and abetting in the commission of any of the above stated activities.
While the Directive defines criminal activity as any kind of involvement in the commission of a serious crime and gives a non-exhaustive list of examples of serious crimes, the Lithuanian implementing legislation does not give a specific definition of what would constitute criminal activity. The only indication provided is within the definition of money laundering itself, i.e. “money derived from criminal activity.” Therefore, analysing Lithuanian implementing legislation, “money or property derived from criminal activity” would be considered to be money or property derived from the commission of any criminal activity.
Thus, Lithuania has imposed stricter requirements than those of 2MLD. According to Lithuanian implementing legislation, “criminal activity” should be construed as any kind of criminal involvement in the commission of any of the offences considered to be criminal under the Criminal Code of the Republic of Lithuania (such as, for example, the appropriation of treasure or other high value property found by chance).
It is important to mention that definition of money laundering in the Criminal Code uses the language “knowing that such property is derived...”, therefore just suspicion is not enough to qualify the activity as criminal. In this regard, it would be right to conclude that requiring actual knowledge limits the scope of the offence as compared with the Directive. Lithuania has not implemented the tailpiece to Article 1C of 2MLD, which