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European policymakers have called on Lithuania to reduce its financial oversight after the Financial Times revealed that prosecutors suspect that Fintech regular based in the country was used to steal more than 100 million euros Phone card, just weeks before the German payment firm collapsed.
Stasys Jakeliunas, MEP of the Union of Farmers and Greens of Lithuania, told the FT that he hoped the case, involving UAB payment company Finolita Unio, would function as a “wake-up call” for Lithuanian authorities.
“It’s what to expect,” he said. “Fintech needs agile supervision and regulation, and this is lacking in both the central bank and, above all, the financial crime investigation service. They are not up to date with these innovative and fast-moving companies.”
Jens Zimmermann, a German MP for the Social Democrats in Berlin, said competition among EU members to attract fintech technology to their countries runs the risk of “creating a regulatory race to the bottom”.
Wirecard collapsed in June 2020 after revealing a € 1.9 billion hole in its balance sheet. Munich prosecutors suspect hundreds of millions of euros have been siphoned off in the pre-insolvency period and are studying Lithuanian fintech finolite Finolita, owned by Singapore-based Senjo group, one of Wirecard’s potentially fraudulent trading partners.
Criminal authorities suspect that part of a 100 million euro loan, granted by Wirecard in March 2020 to another subsidiary of the Senjo group and prosecuted by Finolita, was channeled to Jan Marsalek, the former director general Wirecard operations that Interpol is looking for.
Prosecutors are also examining € 1.15 million in Wirecard payments to Finolita on the basis of invoices they consider questionable.
Yekaterina Govina, director of the Bank of Lithuania’s financial market oversight service, said Monday that Finolita had been under investigation by the country’s central bank since the “early fall” of 2020.
“The investigation is in its final stages and decisions should be published soon,” he said, adding that there was “zero tolerance for money laundering and terrorist financing in Lithuania… The country is making every effort to avoid it ”.
Matas Maldeikis, a conservative Lithuanian MP, echoed that view and said the Bank of Lithuania “was closely monitoring all financial markets, including fintech technology companies”. He stressed that: “Lithuania is an innovative country where fintech technology companies are welcome, we were one of the main beneficiaries of this sector after Brexit.”
Sven Giegold, a German Green Party MEP, criticized the Bank of Lithuania for not quickly revoking Finolita’s license after she was informed of the transactions. “The central bank has pursued an industrial policy to promote the financial sector rather than regulate the financial sector.”
“The Finolita case shows that fintechs are not sufficiently supervised,” added Fabio De Masi, a left-wing German MP who is part of the Bundestag’s Wirecard committee.
Elfriede Sixt, Austrian co-founder of the European Funds Recovery Initiative, a pressure group on behalf of victims of cybercrime and scams, called Lithuania and Estonia “offshore financial services centers in the EU”, where they obtained licenses to establishing e- monetary institutions, payment service providers or cryptocurrency institutions “had apparently become very popular and easy”.
Lisa Paus, a German Green Party MP, said scandals such as FBME Bank, Wirecard and Finolita showed that the fight against financial crime was a multinational issue. “Supervision of large payment service providers, such as banks, must move to the EU level.”
The Lithuanian Ministry of Finance and the European Central Bank, the EU’s top banking supervisor, declined to comment.
The German Bundesrechnungshof, the country’s main audit institution, has scolded German institutions for seriously manipulating the Wirecard case.
“None of the various actors (the Ministries of Finance and Justice, BaFin, Deutsche Bundesbank, the financial reporting panel) were aware of the explosiveness of the case or made full use of its capabilities,” wrote the body in parliament in a document seen by the FT. Handelsblatt first reported on the audit body’s review.
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