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An independent report found that prominent Scandinavian banks have alleged that several multimillion-dollar crypto-to-fiat transactions have taken place in the region since 2015, raising concerns of money laundering among authorities.
Many of the speculators named in the report are Lithuanian taxpayers who used bank accounts in neighboring countries to cash out their gains. However, FNTT, Lithuania’s financial crime agency, is asking questions about where the initial investments came from, which in some cases cross the million-dollar mark.
Lithuania has strict monetary controls for citizens in place. In this case, police authorities scrutinized single trades worth over €80,000 in one day and extracted information from all stakeholders involved to facilitate a particular trade.
Another Lithuanian agency, the Financial Crime Investigation Service (FCIS), found 500 private individuals and 100 corporate entities have laundered their money via the Baltic nation, attracting the attention of authorities in neighboring Estonia. All the accused parties are clients of at least one of seven regional banks and financial service providers, – Luminor, Danske bank, Citadele, Pervesk, Mister Tango, SEB, and Swedbank.
Lithuanian news outlet Delfi reported that citizens of Lithuania and Sweden facilitated the three largest-known transactions, worth €27.7, €16.6, and €14.1 million respectively. However, not all trades were unreported and conducted privately. FCIS director Mindaugas Petrauskas noted investors enjoyed substantial gains from the trading of digital assets, with one known individual reporting profits crossing €6 million within the past year.
Currently, the FCIS is strategically scrutinizing exchanges and financial providers in the region with foreign currency accounts, such as USD and others, under the scanner as well. Lithuania’s central bank, Lietuvos Bankas, is actively taking part in the investigations and have provided information of all individual and corporate traders to concerned government authorities from the region to examine the money flows.
Petrauskas noted most speculators declared massive profits from cryptocurrency investing, of which the most came from early-stage investing in Initial Coin Offerings (ICOs) and private token issuances. He noted tax rates on cryptocurrency gains in the country is a paltry 5 percent, and most traders chose to show both investments and returns as profit.
The FCIS head highlighted that a significant risk of money laundering exists in cryptocurrency trading and ICO investing, as tracing the funds traded can prove to be challenging for authorities. He added that Lithuanians had taken a liking to the high-risk, high-reward asset class and a considerable boom in ICO funding is being witnessed in the Balkan state.
For 2017, Lithuania accounted for only €82 million investments in local ICOs. However, the figure has risen to €500 million in 2018, which raises questions about where the initial capital comes.
Meanwhile, Petrauskas stated the Finance Ministry in Vilnius, Lithuania’s capital, has submitted a set of proposals aimed at regulating the ICO industry. The crime unit wants several features of the cryptocurrency market to be controlled, including the accepted level of anonymity during transactions, usage of exchanges and wallets developed and incorporated in tax havens and the “international character” of each trade transaction.