2023-05-22
Bank of Lithuania: KYC information collected by banks helps to strengthen the country’s resilience to threats of money laundering and circumvention of sanctions
By providing accurate and relevant information to financial institutions, residents and businesses help to strengthen the country’s resilience in anti-money laundering and implement sanctions. The Bank of Lithuania is providing an explanation on why payment service providers request certain information from customers, the volume of information to be provided and the reasons behind it.
“Financial institutions must know their customers – residents and businesses – and monitor payment flows. This is needed to create barriers to money laundering, including fraud. Where information on a customer is insufficient and communication is poor, it can result in unpleasant consequences for both parties, such as restrictions on services,” says Vaidas Cibas, Director of the Financial Services and Markets Supervision Department.
The Bank of Lithuania receives enquiries from residents and businesses about the information collected by financial institutions providing payment services for the purpose of knowing their customers. They ask why financial institutions collect personal information and whether they do that lawfully and reasonably. There are some complaints that payment service providers possibly request excessive information, interfere with the activities of companies, etc.
Taking the discussed practice and the reasons for miscommunication into account, the Bank of Lithuania has prepared a leaflet (533.5 KB download icon) with detailed answers to the most frequently asked questions in this area. We hope that it will help to better understand the Know-Your-Customer (KYC) requirements. This is ongoing work: the Bank of Lithuania, having carried out a survey of de-risking practices, later on published a public consultation on this matter and provided recommendations to financial market participants.
The Bank of Lithuania seeks to simplify the provision of KYC information and has recommended using questionnaires adapted to different consumer groups (students, the elderly, legal entities, non-governmental organisations, etc.). The fulfilment of these expectations by financial market participants will be assessed later this year.
The Bank of Lithuania has also recommended that financial institutions are given more possibilities or tools for their customers to receive or provide information in a safe manner. It is especially important to take into account the needs of people who lack access to the internet. Therefore, the option of filling in the KYC questionnaire by phone offered by financial institutions, in particular for older people, is welcomed.
Considering the increase in fraud, you should always remain vigilant and provide personal information only after making sure that it is being requested by your bank rather than by fraudsters. The Bank of Lithuania reminds once again that financial institutions never request in any way to disclose your electronic banking codes, passwords or card details and never send messages or emails with links asking to enter your payment details.
The Bank of Lithuania reiterates that financial institutions must prevent financial crime and properly implement anti-fraud measures and international sanctions. Usually they apply the Know-Your-Customer (KYC) principle recognised worldwide: they collect certain customer information to find out about their payment habits and sources of revenue to be able to respond to irregular activities relating to payment transactions executed by a customer. Financial institutions must constantly check and update this information. Generally, KYC surveys and questionnaires are used for that purpose.
A financial institution may request to provide or clarify:
- documents confirming customer identity;
- contact details (address, email, phone number, place of work);
- information on income earned (e.g. wage);
- information on transactions being executed and the source of funds;
- documents supporting payment transactions (agreements, invoices, information on goods), etc.;
- information on whether a customer is engaged in political activities and/or information on persons related to them, who participate/participated in such activities;
- information on the purpose and nature of business relationships;
- information on business partners of a customer;
- other information required to know the customer.
Information for customers on the Know-Your-Customer principle (533.5 KB download icon)