During the pandemic, the scale of fraud using Fintech companies has likely increased

Published June 3, 2021

During the pandemic, the scale of fraud using financial technology (Fintech) companies has likely increased. Supervisory institutions overseeing money laundering lack sufficient resources to prevent rapid and illegal profiting by FinTech companies, shows research conducted by Transparency International Lithuania.

According to experts that participated in the study, the biggest advantages of Fintech companies such as speed and innovation also determine the greatest money laundering risks related to their activities.

Companies with the highest risks are those working with cryptocurrencies due to the higher value of these currencies.

There is a lack of publicly available information provided by FinTech companies operating in Lithuania. For example, less than one out of ten companies publish their financial statements, and some companies do not even have their own websites.

There is a lack of assessments as well as primary data, statistics that would allow to understand the actual extent of money laundering and risks in the FinTech sector in Lithuania. In addition, there is insufficient cooperation between public and private sector bodies, between FinTech companies.

Experts question whether FinTech companies could currently ensure effective prevention of money laundering without external assistance.

“Money laundering goes hand in hand with grand corruption. Knowing Lithuania’s ambitions in the sector of financial technology, both institutions responsible for money laundering prevention and FinTech companies should make an extra effort. I would very much like the prevention of money laundering to become a priority for our political leaders”, said Sergejus Muravjovas, CEO of Transparency International Lithuania.

Based on the main risks identified by the experts, TI Lithuania suggests:                                                                                                                                    

  • To conduct a thorough assessment of risks related to money laundering in FinTech sector which would help set priorities for the prevention;
  • To make publicly available data needed to ensure effective prevention of money laundering, (e.g. register of beneficial owners, a list of politically exposed persons);
  • To ensure continuous sharing of data between authorities responsible for money laundering prevention in the FinTech sector and other entities in order to better understand the extent of money laundering, the risks associated with it, and to better manage them;
  • For FinTech companies and associations to proactively take on more responsibilities in money laundering prevention by strengthening AML-related knowledge and competences of employees;
  • To ensure adequate capacities of anti-money laundering institutions that would ensure adequate money laundering prevention in the FinTech sector.

The study’s insights and recommendations were prepared based on the analysis of primary and secondary sources, in-depth semi-structured interviews with representatives of monitoring and supervisory authorities, ministries, FinTech companies, as well as experts working in this field (12), data from official enquiries (4), responses to the questionnaire received from 32 FinTech companies, and the assessment of the transparency of 10 companies.

A short summary of the findings can be found here. The full study can be found here (in Lithuanian).

For more information:

Sergejus Muravjovas, sergejus@transparency.lt