FCIS Requirements for Crypto-License in Lithuania

A crypto-friendly, attractive jurisdiction in the European Union, Lithuania is now one of the most attractive locations to start a crypto-business.

There are no specific requirements for onsite personnel in Lithuanian regulations, making them more flexible in terms of set-up and lower in ongoing costs.

Is a license needed for your activity?

You need a license if you will offer either of the below services:

• Virtual Currency Exchange – Service where a client exchanges a virtual currency to fiat, fiat to virtual currency, or one virtual currency for another.
• Virtual Currency Wallet – Services that store encrypted keys for their customers, it can be used for storage or transfer of virtual currencies.

Virtual currency is a value represented in digital form that can be digitized, stored or sold and accepted as a means of payment by individuals or entities.  The authority that controls the fulfilments of the regulations is called Financial Crime Investigation Service (FSIC)

Information that should be provided when applying for the license:

In order to be listed as a currency exchange operator, a person other than those set forth in Article 9(1) of the Law must submit to the supervisory authority:

• An application, in the form established by the supervisory authority (Annex to the Rules of Administration of the List of Currency Exchange Operators, approved by Resolution No 03-195 of the Board of the Authorities of 21 October 2014 on Approval of the Rules of Administration of the List of Currency Exchange Operators), to include in the List of Currency Exchange Operators, specifying in this List, inter alia, information about the person (name, address of registered office, code, if available).
• Upon filing the application by a foreign financial undertaking, information about the applicant is recorded from the foreign undertaking’s register.
• It is essential to provide information about the person’s participants with qualifying holdings in the authorised capital and/or voting rights, and document that a person’s participants meet the requirements specified in Article 4 of the Law in terms of holding qualifying capital and/or voting rights.
• Article 3(4) of the Law specifies that the person must provide information about his or her heads, as well as documentary proof that the head (or heads) meets the requirements laid out in Article 5(1).
• In accordance with the law on the prevention of money laundering and terrorist financing of the Republic of Lithuania, a description of the internal control system will be implemented to perform the duties related to money laundering and terrorist financing prevention.

A currency exchange operator (Licensed Company) is required to have a Head who is a member of the Board and is responsible for the company’s activities, unless the company (Licensed Company) is also engaged in other activities concurrently with currency exchange.

Article 5(1) of the Republic of Lithuania Law on Currency Exchange Operators prohibits a person convicted of committing a crime related to money laundering or terrorist financing from being a head of a currency exchange operator (Licensed Company).

Currency exchange operators must notify supervisory authorities of their plans to replace currency exchange operators (Licensed Companies) and simultaneously submit information necessary to assess whether the new currency exchange operators comply with the above-mentioned requirements, as determined by the supervisory authority.

Upon submission of the following documents to the Authorities, a nominee for a currency exchange operator (Licensed Company) is granted non-objection:

• A notification of the replacement of the Head.
• A questionnaire filled in by the person applying for the position of Currency Exchange Operator, completed according to the form established in the Annex to the Description of Procedures for the Submission of Information on the Managers of Currency Exchange Operators to the Authorities, approved by Resolution No 03-197 of the Authorities of 21 October 2014 on the Approval of the Description of Procedures for the Submission of Information on the Managers of Currency Exchange Operators to the Authorities.
• Documentary proof that the Head of a currency exchange operator meets the requirements laid down Article 5(1) of the Republic of Lithuania Law on Currency Exchange Operators.
• Document evidencing the person’s identity.
• A new Head of a currency exchange operator can only take up office if the supervisory authority does not object to the nominee for the Head of the currency exchange operator.

Crypto license in Lithuania

Statutory timeframe

In the event that the individual applies for inclusion in the List of Currency Exchange Operators, the supervisory authority shall examine his or her application as well as any information and documents submitted. It shall not take a decision regarding the inclusion or noninclusion of the individual before 30 calendar days after receiving the application and all supporting documentation.

The supervisory authority shall have the right to request further information or documents in writing from the applicant in case of doubts during the examination of the application to be included in the List of Currency Exchange Operators, so that the deficiencies identified can be corrected or eliminated. Following receipt of further information or documents, the supervisory authority will decide whether to include or not include the person in the List of Currency Exchange Operators within 30 calendar days.

It is possible to extend this time limit by a motivated decision of the supervisory authority, but for no longer than 30 calendar days at a time.

How and when are the authorities informed?

Under Article 25 Part 4 of the Law on Money Laundering and Terrorist Financing, any legal person who has begun operating virtual currency exchanges or virtual currency wallets is required to notify the data processor in the Register of Legal Entities about the activities conducted by the service provider within five working days of the beginning of the activities. Within five working days of the activities commencing. In providing this information, virtual currency exchange operators and custodian virtual currency wallet operators confirm that they understand and meet the requirements of legal acts on the prevention of money laundering and terrorist financing, as well as the members of their management or supervisory bodies and the beneficial owners.

A senior employee of financial institutions or other obliged entities must be designated under Article 22 Part 1 of the Law on the Prevention of Money Laundering and Terrorist Financing for the purposes of coordinating the implementation of measures to prevent money laundering and/or terrorist financing outlined in this Law, as well as liaising with the Financial Crime Investigation Service. A member of the board, who is responsible for organizing the implementation of the money laundering and/or terrorist financing prevention measures outlined in this Law, must be designated by the financial institutions or other obliged entities that are led by the board. Further, senior staff should interact with the Financial Crime Investigation Service. In the event that such employees or board members are designated or replaced, the Financial Crime Investigation Service must be notified in writing within seven working days of the date of the designation.

Information has to be provided by the notification in written by email.

Moreover, virtual currency exchange operator and depository virtual currency wallet operator, or the beneficiary of such entities may not be a natural person who has been convicted of a serious crime against property, property rights and property interests, the economic and business order, the financial system, the civil service and the public interest, and has the criminal record that is in force and has not been annulled.

The requirements for the implementation of AMTF prevention measures are set out in the Law.

Instructions addressed to money operators of deposit virtual currencies and operators of virtual currency
exchange offices (Crypto).

Amendments to the Lithuanian Law on the Prevention of Money Laundering and Terrorist Financing 2022/2023

A new regulatory framework to combat money laundering and terrorist financing will be established by the Lithuanian authorities for cryptocurrency businesses in 2022. AML legislation was amended and supplemented earlier this year regarding Articles 2, 9, 25, and 253 of the Lithuanian law on preventing money laundering and terrorist financing.

Some of the changes will take effect between January 2023 and January 2025, but most will go into effect on November 1, 2022.

AML supervision is the responsibility of the Financial Crime Investigation Service (FNTT), and the implementing legal act for this law must be adopted by the 31st of October 2022.

Crypto companies from Lithuania and branches of crypto companies incorporated in the EU or elsewhere must ensure full compliance with the new requirements by December 31, 2022 if they have started or plan to continue to offer virtual currency exchange and/or cryptocurrency wallet services before the date of these amendments’ entry into force.

Every Lithuanian company whose legal form is either a Private Limited Liability Company (UAB) or a Public Limited Liability Company (AB) and who started to offer virtual currency exchange and/or crypto wallet services before or is planning to continue to offer these services after the date of entry into force of these amendments, is obligated to submit to the State Enterprise Centre of Registers the documents required to register the authorised capital if the authorised capital doesn’t correspond to the amount of the authorised capital specified in the new act. A deadline of 31st December 2022 must be met.

Other relevant documents that can prove compliance with the new amendments outlined below must be submitted by Lithuanian businesses and foreign branches of other legal forms by this deadline.

Amendments to Article 2

Be sure to check with your legal system to see if your business activities are related to virtual currencies and regulated as per the applicable legal system laws before diving into Lithuanian AML legislation.

According to the updated definition, virtual currency is a digitally based currency that does not have the status of a legaltender, and is therefore not governed or backed by a central bank. Virtual currencies aren’t necessarily backed by legal currencies, but they can still be used as means of exchange by legal or natural persons, as well as transferred, stored, sold, exchanged, invested and used for settlements electronically.

Changes to Article 9

Among the most significant changes was a reduction in customer due diligence (CDD) threshold to 700 EUR. When facilitating a transaction or a combination of transactions worth more than 700 EUR, a virtual currency company must conduct appropriate processes to identify the customer and the beneficial owner as well as verify their identity.

Multiple virtual currency exchange operations within 24 hours that seem to be related are another change directly impacting CDD and KYC procedures. Customers who perform several connected exchange operations with virtual currency or transaction with virtual currency involving funds equal to or exceeding 700 EUR are also required to provide immediate identification.

Further, as part of the new supplement to Article 9, operators of virtual currency exchanges or providers of cryptocurrency wallets must collect, store, and share the following information with exchanges, wallet providers, or other financial institutions that provide the recipient with the transaction:

• A person initiating a transaction needs to provide relevant information about himself or herself – their full name, unique transaction code, identification code for their payment account or crypto wallet, identification number for their passport, citizenship, and residential address.
• An entity’s name and ID code, its payment account or crypto wallet address, the code (or, if no code is provided, its registration statement), and its registered address if it is a legal entity
• An identification code for the payment account or crypto wallet and the full name of the recipient of the transaction, if it’s a natural person
• An indication of the recipient’s name and the code (if one is provided) as well as the identification codes of the payment account or crypto wallet, if the recipient is a legal entity

For the sake of facilitating virtual currency transactions, both virtual currency service providers – sender and recipient – must take into account this fundamental addition to AML law. If the information mentioned above is not provided, neither party is allowed to proceed with the transaction (send or accept).

In the business of offering virtual currency exchanges and crypto wallets, it goes without saying that KYC processes have to be completed before anonymous accounts or accounts with fictitious names can be opened.

Changes to Article 25

The requirements for individuals and legal entities affiliated with virtual currency exchange services and crypto wallet providers have been redefined in Article 25.

Those who are convicted of any of the following crimes aren’t permitted to be beneficiaries or members of the management and supervisory bodies of a company that provides virtual currency exchange services and/or facilitates crypto wallets:

• An annulled criminal record still counts here if you have committed a serious or very serious crime that is included in the Lithuanian Criminal Code or a foreign criminal law.
• Crimes committed against property, rights and interests of property, economics, financial system, public service, public interests, or public safety in Lithuania or abroad (these records will no longer count after five years following the conviction)
• Criminally responsible for any other crime included in Lithuania’s Criminal Code or a foreign country’s criminal code within the previous 3 years

Crypto companies will need to adapt to more significant additions to Article 25. Keeping in mind the Lithuanian Personal Income Tax Law, every Lithuanian firm providing virtual currency exchange or crypto wallet services must have a permanent resident manager. Management members can represent only one crypto wallet or virtual currency exchange company at a time.

The registered authorised capital of a private limited liability company (UAB) or public limited liability company (AB) that offers or plans to offer virtual currency exchange services or cryptocurrency wallet services must be at least 125,000 EUR if the company is established in Lithuania.

There are a number of other virtual currency exchanges and crypto wallets that have to have performance guarantees provided by insurance companies, financial institutions, or guarantee documents issued by companies based in the EU or abroad. The amount of each customer’s damage claim must exceed 100,000 EUR, and the amount of all customer claims must exceed 500,000 EUR in one year.

In addition, legal persons must find an exchange and/or crypto wallet service located in the country in which they operate. The essential functions of these businesses must remain in Lithuania, as well as the core services they provide to Lithuanian clients.

Addition of Article 25³

Lastly, when it comes to administering the information about virtual currency exchange operators and crypto wallet providers, the State Enterprise Centre of Registers maintains the list of such businesses established in Lithuania and branches of businesses established in an EU or other country.

The following information is to be made publicly available on the authority’s website:

• Name of the business
• Code of the business
• Registered office address

• Date of commencement of business activities
• Email address
• Website address

If you’re not sure which parts of the new legal act apply to your business and how to duly comply with the new law, our team here at Company in Lithuania UAB will be delighted to provide further guidance. Contact us today to receive a tailored consultation that will enable you to sustain the growth of your virtual currency business.

 

Employees of Company in Lithuania UAB will be happy to help in obtaining a cryptocurrency license in Lithuania. Based on the needs of customers from all over the world, Company in Lithuania UAB has developed a comprehensive offer “COMPANY & CRYPTO LICENSE IN LITHUANIA” package which includes the purchase of a Lithuanian company plus all the necessary services to obtain a crypto license. Assistance includes drafting the necessary documents, drawing up the company’s procedural and KYC rules and support throughout the entire process of obtaining a license.