Lithuania showcases regtech prototype amid focus on anti-money laundering efforts

By on 25/02/2021
Lithuania: the number of active fintech companies in the Baltic state increased from 210 to 230 last year, according to a report | Credit: dmvl; Pixabay

Lithuania’s central bank, Lietuvos Bankas, showcased a new regulatory technology (regtech) protoype this week that automates reporting procedures, cutting the administrative burden for financial market participants.

The prototype – developed by two IT companies, Columbus Lietuva and Peekdata – uses an application programming interface (API) that financial institutions can install. This automatically collects the required data from the institution and submits them in a standardised format to the supervisory authority.

Testing focused on anti-money laundering (AML) uses, but could automate reporting procedures for other financial market participants, according to Lietuvos Bankas. It also gives the regulator “an entirely new level of monitoring and analysis”, according to the press release.

“This solution is revolutionary in terms of its efficiency and accuracy,” said Ramūnas Baravykas, head of regtech and advisor to the director of Bank of Lithuania’s supervision service. “During the testing period, we used reports for anti-money laundering [AML] purposes, yet the range of its application is very wide.”

The announcement came as Lithuanian authorities look to bolster the country’s AML efforts. The central bank is hoping to increase its data management “maturity” while, separately, a new Centre of Excellence in Anti-Money Laundering – a public-private initiative – is set to open this year.

As a next step, the central bank plans to rollout of the API tool to other national institutions and market participants. Amendments to legislation would be needed before it could go live. Lietuvos Bankas has also submitted the idea to the Switzerland-headquartered Bank for International Settlements Innovation Hub to look at how it could be used more globally.

Fintech boom puts spotlight on AML

The importance of AML was highlighted in a report, published last week by Invest Lithuania, an agency of the Ministry of Economy, that focused on the country’s fintech sector.

In 2020, more than 81 million payments were made within the Bank of Lithuania’s payment system, CENTROlink, according to the Fintech Landscape in Lithuania: 2020-2021 Report. This was double the number from 2019, the study says.

Fintechs also enjoyed strong growth, according to its findings. The sector generated almost €115.8 billion (about $140.5 bn) of payments in 2020 – again double the previous year, the report says. The number of payment service providers accessing the system also increased from 85 in 2019 to 117 in 2020, it adds.

“Growing revenues helped many Lithuania-based fintechs to expand their teams,” said Invest Lithuania’s head of technology sector team, Gintarė Bačiulienė. “According to our report, at the end of the year, there were around 4,000 people employed in fintech, a 17.6% increase year-on-year. And while a large part of the sector’s companies run modestly sized teams, 35% of them employ more than 10 people.”

The report summary added that with “such impressive growth, the topic of AML has never been more relevant”. Indeed, Lietuvos Bankas’s executive director of financial market supervision service, Jekaterina Govina, noted in the report that “as Lithuania’s financial market grows steadily alongside technology, we are prioritising AML, cybersecurity and the supervision of other risks”.

Lietuvos Bankas intends to “set the strengthening of the fintech market’s maturity in the field of compliance as our strategic goal for the upcoming four years”, she said, adding that the central bank was also developing innovative supervisory technology (suptech) tools.

The report also quoted the central bank’s board member Marius Jurgilas who wrote that the organisation will “modernise [its] data management system, deploying new regtech solutions, which provided us with lessons on how to streamline reporting procedures as well as reduce the administrative burden and costs for both supervised entities and the regulator.”

This will lead to a two-way information exchange, Jurgilas noted. “As a supervisory authority, we will be able to gain insights on potential market risks and share them with financial market participants in a more timely and accurate manner, resulting in more efficient supervisory practices.”

This year Lithuania will also officially open a Centre of Excellence in Anti-Money Laundering. It is being established by the Ministry of Finance, Lietuvos Bankas and the country’s commercial banks. Other public and private organisations are expected to take part in its activities.

The centre’s aims include to: share information on money laundering and terrorist financing; undertake analyses and prepare guidelines and legislative initiatives to improve Lithuania’s AML and counter-terrorist financing (CTF) framework; and to help businesses with AML/CTF risk assessments.

About Ian Hall

Ian is editor of Global Government Fintech a sister publication to Global Government Forum. Ian also writes for media including City AM and #DisruptionBanking. He is former UK director for the pan-European media network Euractiv (2011-2018), editor of Public Affairs News (2007-2011) and news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in Bulgaria at English-language weekly the Sofia Echo. Ian has an MA in Urban and Regional Change in Europe and a BA in Economics, both from Durham University.

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