Interesting German-Lithuanian Compliance Dispute about Wirecard and fintech regulation

Bafin and the Bank of Lithuania in a compliance dispute
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The spot is on Lithuania! The Financial Times reported that German prosecutors suspect that more than €100M was stolen from Wirecard via the licensed Lithuanian e-Money Institution (EMI) Finolita Unio. Via this fintech, at least €35M was said to have flowed to fugitive ex-Wirecard executive Jan Marsalek and another €65M to the now insolvent company oCap (previously Senjo Trading) in Singapore. Both Finolita Unio and oCap are part of the Senjo Group, one of Wirecard‘s most important partners in Asia, and received a loan of €350M from the latter. Finolita Unio CEO Danas Oliskevicius rejects the accusations and blames the German BaFin.

In an interview, the Finolita Unio CEO blamed the German regulator BaFin for the Wirecard scandal and the problems it caused.

“German regulator was not sharing information and this has created a worldwide crisis. I will put it in plain words: Germany had to act and what they did has mislead the markets.”

Danas Oliskevicius, CEO Finolita Group (SourcE LinkedIn)

Cutting the ties to Wirecard legacy

Marius Jurgilas, responsible for supervision in the board of the Bank of Lithuania, also rebuffed criticism that the regulator should have done more to supervise Finolita Unio. Moreover, he pointed out that the Bank of Lithuania is doing a proper job keeping the financial markets safe. For example, in 2020 alone, the regulator turned down more than 100 applications and revoked 18 licenses over the past three years. Among these revoked licenses are the ones of Bruc Bond or International FinTech of the Israeli Eyal Nachum.

However, the Bank of Lithuania said Finulita Unio should cut its relationship with the Senjo Group and approved a transferal of the groups voting rights in Finolita to a Lithuanian trustee. A probe into Finolita Unio is expected to be finished in the coming weeks, Financial Times reports.

The unexpected defense line

BaFin and the German politicians have actually been heavily criticized in the Wirecard scandal, but they are getting unexpected support in this compliance dispute with Lithuania. The Financial Times journalist Olaf Storbeck has described the Finolito Unio CEO’s criticism of BaFin, German authorities, and politicians as rather absurd:

The fintech issue

We have been following the development of the compliance issue in Lithuania for several years from the cybercrime and scam scene perspective. It is a fact that, as of 2016, many cybercrime organizations have become involved in the financial sector in Lithuania. They used the fintech hype to establish their own financial hub. While all other EU Countries require a minimum initial capital of €5m for a financial institution, the Lithuanian’s can do it with just €1m.

Remember Bruc Bond (previously Moneta International and International Fintech? These then-licensed companies owned by an Israeli group around Eyal Nachum and Tamir Zoltovski have been massively involved in scam facilitation and money laundering. In April 2019, the Bank of Lithuania revoked Bruc Bond‘s license for systematic and serious violation of compliance rules and money laundering. International Fintech voluntarily renounced it.

Take GlobalNetInt (GNI), another regulated EMI notorious for processing proceeds of illegal gambling, broker scams, and crypto businesses. GNI is part of the Israeli MoneyNetint group.

GNI used to maintain the bank accounts for dozens of Estonian crypto firms, many of them involved in scams and money laundering. In 2020, GNI lost its compliance team after they complained about the many suspicious transactions. Most recently, a data leak at GNI flushed relevant documents to FinTelegram proving this. The Bank of Lithuania has also reportedly opened investigations at GNI, as did the local law enforcement agencies. However, we do not know anything about the outcome at this time.

Another example of the questionable Lithuanian fintech scene is the licensed EMI Epayblock, controlled by Polish citizens. In many FinTelegram scam reviews, we found Epayblock as a facilitating payment processor.

The efforts of the Bank of Lithuania are undoubtedly commendable, but it is also true to say that Lithuania is currently a money laundering hotspot in the EU. We will see some surprises in the coming months.

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