2024-07-15
Lietuvos bankas restricts Foxpay activities and appoints a temporary representative to supervise the activities
Due to the emerging threat to the safe and reliable activities of the electronic money institution Foxpay UAB (hereinafter – Foxpay) and the interests of users, Lietuvos bankas restricted the activities of Foxpay and appointed a temporary representative to oversee the institution’s activities.
The temporary representative does not take over the management of the institution and his appointment does not affect customers and their opportunities to use the services. Foxpay will be able to continue to carry out its activities to the extent that is not limited by the obligations of Lietuvos bankas.
In its decision, Lietuvos bankas instructed Foxpay:
• not to start new business relationships and not to provide financial services to customers related to the institution’s shareholder Ieva Trinkūnaitė;
• not to start new business relationships and not to provide financial services to customers classified as a higher risk group of money laundering and terrorist financing, to customers providing investment (Forex, spreads), gambling, information technology, marketing and virtual currencies services.
In order to protect customers’ funds, to ensure the control of the execution of mandatory instructions given by Foxpay and the provision of reliable information related to the institution’s activities to Lietuvos bankas, it was decided to appoint Grant Thornton Baltic UAB as a temporary representative for the supervision of the institution’s activities.
This means that every decision of the management of the institution related to the activities of Foxpay can only be made with the consent of the temporary representative, while Lietuvos bankas will be continuously provided with information about the activities of Foxpay.
The decision of Lietuvos bankas was adopted taking into account the facts established during the inspection completed on 9 July 2024. Due to the threat to consumer rights and public interests, Lietuvos bankas used the right granted by law and took only the necessary preventive measures. Upon receipt of detailed explanations from Foxpay, the results of the inspection will be fully evaluated and a final decision will be made on the measures to be applied for the violations established.
Lietuvos bankas determined that during the inspection period (from 30 September 2022 to 20 March 2024), Foxpay’s operations and management had fundamental and significant deficiencies related to improper implementation of the requirements of legal acts – compliance with licensing requirements, in the areas of prevention of money laundering and terrorist financing and internal control in this area, protection and control of customer funds and information security management.
It was established that Foxpay’s shareholder I. Trinkūnaitė does not meet the requirements of good repute. Furthermore, a person closely related to I. Trinkūnaite was actually involved in Foxpay’s activities, who was involved in various issues related to Foxpay’s operations.
The factual circumstances related to the improper implementation of the requirements for the prevention of money laundering and terrorist financing have also been established. They allow to reasonably believe that Foxpay had a permanent higher risk of conflicts of interest due to I. Trinkūnaitė and companies associated with her, and this risk was not properly managed.
Foxpay did not adequately regulate and evaluate cases where, according to risk assessment and management procedures, a higher risk of customer money laundering and terrorist financing was identified – both due to the assessment of documents collected to determine the customer’s assets and the source of funds, and due to the application of enhanced monitoring measures.
In certain cases, Foxpay’s monitoring system did not work and suspicious customer payment transactions were not stopped, Foxpay did not monitor internal payment transactions between the institution’s customers. There were also no real-time monitoring scenarios that would ensure proper monitoring of customers who are providers of services related to virtual assets.
During the audit period, Foxpay did not adequately implement the requirements for the protection of customer funds and internal control and information security management in this area. There is a record of the fact where without any legal basis, a legal entity providing Foxpay services disposed of Foxpay customers’ funds, the transfer of which to the Foxpay special account for the protection of customer funds depended on whether that entity would make the aforementioned transfers and whether that entity would do so on time.
It was also found that Foxpay gave access to its information systems to users whose identity could not be determined. This threatens the security and reliability of Foxpay’s operations, the protection of customer interests and funds.
In addition, during the inspection, Foxpay provided Lietuvos bankas with inaccurate, incorrect and incomplete, and in some cases, contradictory information related to the institution’s customers, their files and completed payment transactions, internal control processes, etc.