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Detention of funds in Lithuanian banks and fintech

30 May 2024

In recent years, Lithuania has emerged as a significant player in attracting numerous fintech companies and establishing a robust banking ecosystem. However, with the increased activity in the financial market, incidents involving detained funds have also risen, posing challenges for individuals and businesses.

The detention of money due to Anti-Money Laundering (AML) requirements has become a common, albeit often frustrating, experience for bank customers. This situation arises when funds are temporarily held or not immediately available due to various banking protocols. Understanding the reasons behind detained funds, and knowing how to seek legal assistance to recover them, is crucial for navigating Lithuania's banking and fintech environments.

Impact of Detained Funds on Businesses

The detention of funds can have severe consequences for businesses, including:

  • Operational Disruptions: Lack of access to funds can halt day-to-day operations, delay payments to suppliers, and affect payroll, causing significant operational challenges.
  • Reputation Damage: Continuous issues with detained funds can harm a company's reputation with clients, investors, and partners.
  • Financial Losses: Extended periods of fund detention can lead to missed business opportunities, financial penalties, and loss of revenue.

Understanding Detained Funds

Detained funds refer to money that is held or frozen by a financial institution, preventing the account holder from accessing it. This can happen for various reasons, including but not limited to:

  • Suspicious Activity: Financial institutions are obligated to monitor for suspicious activities to prevent money laundering and other illicit activities. Transactions that appear unusual or do not align with the account's typical behavior may trigger a freeze.
  • Regulatory Compliance: Compliance with international and local regulations, such as AML and Know Your Customer (KYC) requirements, can lead to detained funds if there are discrepancies or incomplete documentation.
  • Legal Disputes: Funds may be detained as part of legal proceedings, including disputes over ownership or claims from creditors.

The Legal Framework in Lithuania

Lithuania's banking and fintech sectors are regulated by the Bank of Lithuania, which enforces local AML and KYC regulations. The legal framework ensures the integrity of the financial system but also creates scenarios where funds might be detained due to compliance issues.

When funds are detained, the affected parties need to navigate a complex legal environment to secure their release. This often requires understanding both national regulations and EU directives that Lithuania adheres to.

Steps to Recover Detained Funds

  • Identify the Reason: The first step in recovering detained funds is understanding why the funds were frozen. Financial institutions are typically required to provide a reason, although this may not always be immediately clear.
  • Gather Documentation: Compile all relevant documentation, including identification, transaction records, and any communication from the bank or fintech company. This information is crucial for demonstrating the legitimacy of the funds and the transactions.
  • Engage Legal Assistance: Given the complexities of financial regulations, engaging a lawyer with expertise in Lithuanian banking and fintech laws is often necessary. Legal professionals can help navigate the regulatory environment, communicate with financial institutions, and represent the account holder's interests.
  • Formal Appeal: Legal assistance can aid in drafting and submitting a formal appeal to the financial institution, providing all necessary documentation and arguments to support the release of the detained funds.
  • Regulatory Complaint: If the financial institution does not respond satisfactorily, a complaint can be filed with the Bank of Lithuania. The regulatory body can investigate the matter and has the authority to enforce the release of funds if the detention is found to be unjustified.
  • Judicial Recourse: In some cases, it may be necessary to pursue judicial action. This involves filing a lawsuit to challenge the detention of funds. The legal process can be lengthy and complex, but it provides a formal avenue for resolving disputes.

Expertise of Sulija Partners Law Firm Vilnius

Our law firm can assist with addressing customer due diligence questions, explaining transactions, determining whether they can potentially lead to the detention of funds, and other matters related to securing the release of funds. Our expertise in financial regulations can help you navigate the complexities of AML compliance and advocate on your behalf by filing a formal appeal, regulatory complaint, or seeking judicial recourse. For more information, please contact us at info@sulijapartners.com.

 

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Šulija Partners Law Firm Vilnius, registered office Jogailos street 11, Vilnius, LT-01116, Lithuania, fax +370 52051926, e-mail: info@SulijaPartners.com

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