Lithuania Imposes Record Fine on Crypto Company Over Sanctions

On 10 July 2024, the Lithuanian Financial Crime Investigation Service (FCIS) reported that it has fined EUR 9.3m the operator of virtual currencies, Payeer, for violation of international sanctions and AML legislation.

• https://fntt.lrv.lt/lt/naujienos/virtualiuju-valiutu-operatoriui-fntt-skyre-rekordine-beveik-93-mln-euru-bauda/

EXTRACTS OF THE PRESS RELEASE SAYS [TRANSLATED].

1. The Financial Crimes Investigation Service (FNTT) awarded Payeer (the company) a record FINE of more than EUR 8.23 million for the identified violations of international sanctions.
• This company carried out the activities of the operator of depositary virtual currency wallets and the operator services of the VIRTUAL CURRENCY EXCHANGE (VASP), registered in Lithuania.

2. KEY DATES

• UAB Payeer was registered in Lithuania on 20 October 2022.
• In 2023, the company that carried out the ISP's activities attracted the attention of FNTT officials.
• But it started its activities on 17 January 2023, when its predecessor, the Estonian company Payeer, revoked the license to carry out VASP activities.

3. The FNTT's Commission for the Implementation of International Sanctions, which evaluated the collected material, found that

• Since the beginning of its activities, Payeer has owned the cryptocurrency platform Payeer.com.
• Through this platform, the company has allowed its customers, mainly from Russia, to conduct transactions in Russian rubbles, transferring them from and to Russian banks sanctioned by the European Union.
• Russia's individuals and legal entities were also allowed to receive the services of a crypto-asset wallet, account management, and custody.

4. The company violated international sanctions laws for more than 1.5 years. During this period,

• JSC "Payeer" had at least 213 thousand customers, and the company's revenue amounted to more than $164 million. Euro.

5. According to the legislation, the company was obliged to identify the customer when providing VASP services to ensure that services were not provided to sanctioned         customers, existing accounts had to be closed, the disposal of funds or economic resources of the entities was suspended, and the FNTT had to be informed about             the suspension.

6. The FNTT found that the company violated.

• Not only the formal but also the essential requirements of the law and regulations;
• The identities of the company's customers were not properly identified and verified intentionally not to lose a significant part of the income.

7. Also, violations of the Law on The Law of the Law were found. It was found that

• The company did not notify the FNTT about customer transactions or transactions in virtual currency equal to or exceeding 15 thousand.
• Shortcomings have been recorded in internal policies and internal control procedures related to identifying and verifying customers and beneficiaries, risk assessment, risk management, presentation of reports and information to the FNTT, etc.

Key facts from Bloomberg

1. Lithuania fined crypto company Payeer a record €9.3 million ($10.1 million) for sanctions and money laundering violations involving Russian clients.
2. Payeer allowed Russian customers “to carry out transactions in Russian rubbles by transferring them from European Union-sanctioned Russian banks,” the Financial Crimes Investigation Service said in a statement on Tuesday. Russian individuals and legal entities were “allowed to receive cryptocurrency wallet, account management or storage services,” the service said.
3. The Baltic country, a member of the EU and the euro, established itself as a hub for financial technology startups over the past decade. However, the authorities are now trying to cut the number of crypto firms through a new licensing plan to prevent digital assets from being abused to launder money or swindle investors.
4. Lithuania-registered Payeer was fined €8.24 million for violating international sanctions and €1.06 million for violating anti-money laundering laws.

Additional info

1. The company UAB Payeer was registered in LT on 20 October 2022 but started its activities on 17 January 2023, when its predecessor, UAB Payeer, registered in EE, had its license to carry out VASP activities revoked.
2. The company was then allegedly set up in Lithuania to continue the Payeer's activities, which is incompatible with sanctions.
3. It was established that, since its effective start, Payeer has owned the cryptocurrency platform Payeer.com, allowing its customers, mainly from RU, to carry out transactions in roubles from and to sanctioned RU banks. RU natural and legal persons were also given access to cryptocurrency wallet, account management or custody services.
4. Payeer was found to have breached sanctions for more than 1.5 years. During this period, Payeer had at least 213,000 customers and more than EUR 164 million in revenues.
5. The company breached not only formal but also substantive requirements of the law and regulations. The identities of the company's customers were not properly identified and verified deliberately to avoid the loss of a significant part of the revenue. Transactions in breach of sanctions through sanctioned RU banks were also not terminated.

Sources

1. https://www.bloomberg.com/news/articles/2024-07-10/lithuania-imposes-record-fine-on-crypto-company-over-sanctions?srnd=economics-v2
2. https://fntt.lrv.lt/lt/naujienos/virtualiuju-valiutu-operatoriui-fntt-skyre-rekordine-beveik-93-mln-euru-bauda/
3. https://www.gherson.com/blog/lithuanian-financial-crime-investigation-service-fines-crypto-firm-payeer-for-sanctions-violations/
4. https://cointelegraph.com/news/crypto-payment-service-payeer-record-fine-lithuania