Survey: How to strike balance between de-risking policy and accessibility of financial services?

“There is definitely no room for dirty money in the Lithuanian financial system but the anti‑money laundering measures applied by financial institutions shall not limit access to payment and other financial services. We want to hear both consumers and financial institutions, thus seeking to help pursue a balance between risk mitigation restrictions and access to such services,” said Jekaterina Govina, Director of the Financial Market Supervision Service of the Bank of Lithuania.

According to Ms Govina, the desire of financial institutions to improve anti-money laundering efforts and reduce related risks is completely understandable, yet the implemented risk management measures should be proportionate to the intended objective and should not contribute to the risk of financial exclusion of legitimate businesses or individuals and their groups.

The Bank of Lithuania has recently been receiving an increasing number of complaints from payment service consumers concerning financial institutions’ decisions to deny the opening of a payment account, impose restrictions or close their payment accounts on the pretext of internal risk management procedures. Even though there is no evidence so far that any consumers have been barred access to payment or other financial services, the Bank of Lithuania has received signals that certain consumer groups, such as non-profit organisations, subjects providing legal services or other financial institutions, have difficulties in getting access to such services. The European Banking Authority (EBA), which has been taking steps to address de‑risking practices at the EU level, has also pointed out the increasing cases, within the EU as a whole, where financial institutions choose to de-risk instead of managing the risks, and limit access to financial services for certain consumer groups.

In light of the issues raised by consumers and financial institutions, the Bank of Lithuania is launching a survey to determine the extent of such de-risking practices and their impact on access to payment services in Lithuania. The survey will involve polling of both consumers and financial institutions, aiming to assess the actual situation in a more objective manner. Following the completion of the survey, the Bank of Lithuania will take into account its findings to decide on measures that could improve the money laundering-related risk management practice and would not amplify financial exclusion risks, while allowing legitimate businesses and natural persons to easily execute payment operations and other financial transactions.

The Bank of Lithuania has already published its position on the right of electronic money and payment institutions (EMIs/PIs) to access bank accounts opened with credit institutions. This position has provided more clarity and helped fintechs operate more smoothly as well as allowed banks to improve cooperation with such businesses while maintaining high risk management standards. The Bank of Lithuania has brought to the attention of the banks operating in Lithuania that some of their decisions, such as those to deny the opening of accounts and/or close them unilaterally, and/or apply restrictions on their access, may cause negative consequences for EMIs/PIs and restrict their licensed activities. Such decisions were often based on banks’ goals to properly manage money laundering and/or terrorist financing risks. The aim of the position was to make sure that while managing these risks banks do not violate the right of EMIs/PIs to have accounts with credit institutions and access them.

Supervision of financial market participants, AML