What it is and what it does
Finding a reliable broker is the key to safe and profitable trading. It is essential to ensure that brokers have accreditation and licenses before signing a contract or handing funds to them for investing. Checking credentials is the first step to working with any broker.
However, merely having a license isn’t enough. The broker should be licensed to deal with clients from your area. In addition, not all regulatory bodies are created equal. It is as important to be aware of which regulators provided the broker a license as it is to check that a broker is regulated. A broker is only as safe and secure as the regulatory body that gave the license.
The Bank of Lithuania works with the European Central bank and other regional banks in Europe. The Bank of Lithuania financial regulator supervises 650 participants in financial markets, including consumer credit providers, banks, insurance companies, payment institutions, and brokerages.
The Bank of Lithuania regulation method is risk-based, which means that it allocates the majority of its resources to supervise products that have the highest amount of risk. The risk-based approach ensures that:
According to its website, Bank of Lithuania brokers are supervised carefully to ensure they are ethical and provide viable and safe financial products to consumers. Clients should receive sufficient and accurate information from brokers and have the right to transparency and access to all of the data regarding their transactions. The Bank of Lithuania says it is committed to protecting customers from fraudulent practices.
Bank of Lithuania regulation uses several methods of oversight:
The Bank of Lithuania provides licenses to financial institutions, including brokers. Off-site supervision includes requirements to submit data at regular intervals. Regulators make on-site inspections. In addition, the bank participates in the Single Supervisory Mechanism along with the European Central Bank.
The Bank of Lithuania provides recourse for customers who have a complaint. It investigates these complaints and provides penalties for licensees who violate standards.
The Bank of Lithuania emphasizes its risk-based assessment system. Market participants under Bank of Lithuania regulation are placed in four categories according to risk, taking into account its size, systemic importance, uniqueness as well as qualitative and quantitative factors.
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Many brokers choose to be licensed by the Bank of Lithuania because it provides access to European stock exchanges, depositories, and clearinghouses. The bank licenses offsite brokers who want to be located close to their clients. This allows brokers not based in Europe to trade European assets and to work with European clients.
Brokers may choose Bank of Lithuanian regulation for the following reasons:
Licensing is fairly quick for Bank of Lithuania brokers and licensees are given the ability to trade and deal with clients all over Europe without having to reside in Lithuania.
The Bank of Lithuania makes the licensing process fairly easy with a program that takes applicants step-by-step through the process. It takes only 3 months to obtain a license.
A broker must take an examination administered by the Bank of Lithuania. Applicants are also given a background check to ensure they have a good reputation. There is also a licensing fee that is held until the examination results are computed. If the applicant passes, the fee is processed. Those who take the examination are notified of the result within three days.
Those who violate the terms and conditions of their license or are found to engage in fraudulent activities are subjected to sanctions by the Bank of Lithuania, including revocation of license, fines, and other penalties in addition to possible legal actions.
The Bank of Lithuania provides broker licenses that are recognized throughout the European Union. It states a commitment to adhere to high standards of financial ethics, to be vigilant about consumer complaints and defend customer rights, and to be on the alert against money laundering.
However, it should be noted that Baltic and Scandinavian banks often make the headlines connected with high-profile money laundering scandals. Recent regional scandals include Latvia’s Trasta Komercbanka, which was in the middle of Russian Laundromat (money laundering) scandal investigations in 2019, the closing of Latvia’s ABLV bank, and the Danske bank in Estonia, which was responsible for Europe’s largest money-laundering scandal.
Compared to many other banks, Bank of Lithuania-licensed institutions do not seem to pose a greater threat than many others in the region. According to a report published by the Organized Crime and Corruption Reporting Project (OCCRP), “Factual data shows the risk of money laundering and terrorist financing in Lithuania is not high.”
However, the OCCRP did express concern over the involvement of Bank of Lithuania associated offshore entities in the Troika laundromat, a massive money-laundering scheme. Half of these offshore participants held bank accounts in Lithuania. The report calls into question the Bank of Lithuania’s approach to risk assessment, which focuses on large institutions that have systemic value rather than on small offshore operations that may be involved in illicit activities.
Despite these caveats, The Bank of Lithuania regulation does not need to be called into question unless the individual broker is engaging in questionable activity. While Bank of Lithuania brokers are not guaranteed to be scrupulous, there is no reason to be automatically suspicious of a broker just because they have a license from the Bank of Lithuania.
If you want to know if a Bank of Lithuania broker is legitimate or if you have been scammed by a Bank of Lithuania broker, book a consultation with our professionals to discuss your questions and concerns.
Customers who have been scammed by brokers with a Bank of Lithuania license can file a complaint and recover their funds with the help of Trader Defense Advisory professionals.