Lithuania hopes for the best and prepares for the worst by further tightening its banking and fintech regulations, following the latest decisions and position papers issued by the supervisory authority. Despite talks of a recession, the banking and finance market remains active, according to Cobalt Partner Akvile Bosaite.
“The Baltic FinReg Summit that Cobalt and the European Investment Bank hosted recently was big news for banking and finance lawyers in the region,” Bosaite begins. “This was the seventh edition of the Baltic conference, and it focused on the most relevant and timely topics for us. In contrast to last year's discussions on AML topics,” she expands, “this year we explored new financial products emerging in the market, particularly those tailored for GenZ. Venture-Debt, a product rather new to the Baltics, also took center stage and, additionally, the conference delved into the regulation of artificial intelligence in the financial sector and the implications for market participants.”
A significant part of the event also revolved around DORA, Bosaite notes, “a framework that applies to all financial institutions, aiming to enhance cybersecurity and combat fraud.” Finally, the event also covered cross-border financial services within the EU. “We were fortunate to have prominent speakers from fintech and banks, as well as regulators from all three Baltic states,” she explains. “Companies like Revolut and Monesa shared their perspectives on working cross-border in various European jurisdictions, for example. It was a great venue for legal practitioners and businesspeople from the financial and regulatory area to gather, exchange ideas, and gain insights.”
Another significant recent development, according to Bosaite, “was the local supervisory authority (Bank of Lithuania) revoking the licenses of Transactive Systems and PayrNet, the two biggest electronic money institutions in Lithuania.” This action was taken due to several breaches, she explains, “including failures in AML/KYC procedures, monitoring of clients, and safeguarding of client funds. The repercussions extended across Europe, given their agencies' presence in various countries.”
PayrNet will also go into insolvency, Bosaite adds, “as they can’t cover all their liabilities, with the proceedings expected to take a long time. This has naturally caught the attention of finance and banking lawyers. And it has brought the importance of robust risk monitoring and AML/KYC policies to the forefront, with the Bank of Lithuania also issuing a position paper targeted at institutions working through agents or intermediaries: they need to do the work to know their clients, like everyone else.”
Beyond that, Bosaite says Lithuania is constantly strengthening its legal base and regulations “to have better risk monitoring procedures and better sanctions and AML/KYC policies. Several other new requirements came in from the Bank of Lithuania – to make sure we have a risk-averse financial system and avoid further AML scandals.”
Apart from the financial sector, Bosaite reports the NATO summit in Vilnius was a major focus for both the authorities and the news cycle. Out of the limelight, facing some setbacks in the manufacturing sector and talks of a technical recession, Lithuania’s economy remained robust. “The economy seems to be in a holding pattern,” she says. “While there were some adverse effects, especially on M&A deals during the winter, the spring and summer have seen a surge in transactions and deals. The financial sector, unicorns, and start-ups are experiencing a positive phase, with tech companies showing resilience even in times of layoffs.” Looking at the big picture, Bosaite concludes “there's cautious optimism among most professionals, despite the lingering recession talks.”
