European policymakers have called on Lithuania to tighten its financial oversight after the Financial Times revealed that prosecutors suspect a regulated fintech based in the country was used to steal more than €100m from Wirecard, only weeks before the German payments firm collapsed.
Stasys Jakeliunas, MEP for the Lithuanian Farmers and Greens Union, told the FT he hoped that the case, which involves payments company UAB Finolita Unio, would function as a “wake-up call” for Lithuanian authorities.
“It’s what to be expected,” he said. “Fintech needs agile supervision and regulation, and that is missing both at the central bank and not least the financial crime investigation service. They are not keeping up with these fast-moving, innovative businesses.”
Jens Zimmermann, a German MP for the Social Democrats in Berlin, said that competition between EU members to woo fintechs to their countries risked “creating a regulatory race to the bottom”.
Wirecard went bust in June 2020 after disclosing a €1.9bn hole in its balance sheet. Munich prosecutors suspect that hundreds of millions of euros were siphoned off in the run-up to the insolvency and are scrutinising Lithuanian fintech Finolita — owned by Singapore-based Senjo Group, one of Wirecard’s potentially fraudulent business partners.
Criminal authorities suspect that part of a €100m loan, that was granted by Wirecard in March 2020 to another Senjo Group subsidiary and was processed by Finolita, was channelled to Jan Marsalek, Wirecard’s former chief operating officer who is wanted by Interpol.
Prosecutors are also examining €1.15m in payments from Wirecard to Finolita based on invoices that they believe are questionable.
Jekaterina Govina, director of the financial market supervision service of the Bank of Lithuania, said on Monday that Finolita had been under investigation by the country’s central bank since “early autumn” 2020.
“The investigation is now in its final stage and the decisions should be published soon,” she said, adding that there was “zero tolerance for money laundering and terrorist financing in Lithuania . . . the country is taking all efforts to prevent it”.
Matas Maldeikis, a conservative Lithuanian MP, echoed that view, saying that the Bank of Lithuania was “closely observing all financial markets, including fintech companies”. He stressed that: “Lithuania is an innovative country where fintech companies are welcome, we were one of the main beneficiaries in this sector after Brexit.”
Sven Giegold, a German MEP for the Green Party, criticised the Bank of Lithuania for not quickly revoking Finolita’s licence after it was informed about the transactions. “The central bank has been conducting industrial policy to promote the financial sector, rather than regulating the financial sector.”
“The Finolita case demonstrates that fintechs are not sufficiently supervised,” Fabio De Masi, a leftwing German MP who sits on the Bundestag’s Wirecard committee, added.
Elfriede Sixt, an Austrian co-founder of the European Funds Recovery Initiative, a lobby group on behalf of victims of cyber crime and scams, called Lithuania and Estonia “offshore financial service centres in the EU”, where obtaining licences to set up e-money institutions, payment service providers or cryptocurrency institutions had “apparently become very popular and easy”.
Lisa Paus, a German MP for the Green Party, said that scandals like FBME Bank, Wirecard and Finolita showed that the fight against financial crime was a multinational issue. “The supervision of big payments service providers, like those over banks, needs to be moved on to the EU level.”
The Lithuanian ministry of finance and the European Central Bank, the EU’s top banking supervisor, declined to comment.
Germany’s Bundesrechnungshof, the country’s top auditing institution, has scolded German institutions for grossly mishandling the Wirecard case.
“None of the various players — the ministries of finance and justice, BaFin, Deutsche Bundesbank, the Financial Reporting Enforcement Panel — realised early on how explosive the case was or made full use of their capabilities,” the body wrote to parliament in a document seen by the FT. Handelsblatt first reported the audit body’s review.