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International Monetary Fund. European Dept.

1. After a past shock that led to a reduction in transnational banking transactions, Lithuania’s financial sector has readjusted to serving non-residents, posing higher money laundering risk, mostly through Fintech companies.2 The non-resident activity in Lithuania has decreased significantly following the financial integrity breaches at Snoras and Ukio banks that lost their licenses in 2011 and 2013, respectively, with involvement of the latter in the “laundromat” operations where Lithuania was used as a transit point for suspicious transactions allegedly linked to foreign criminal activity.3, 4 Subsequently, the BoL focused its monitoring on daily non-resident deposits and transactions in Lithuanian banks. Due to the recent growth of the fintech hub, Lithuania’s financial sector’s focus shifted away from bank-centric focus on servicing domestic market to facilitation of cross-border payments, with most transactions conducted by non-residents with origination and destination outside Lithuania, including higher Money Laundering and Terrorism Financing (ML/TF) risk countries.5 Fintech developments have impacted the financial sector and risk profile of the country, challenging the authorities’ resources and capacity to mitigate the ML/TF risks.