This post will focus on the experiences that ALT Accounting has had in the past 12 months working with more than couple dozen customers thus incorporating them via Power of Attorney (POA), Incorporation Act or Share transfer process, and then handling their application with the Financial Crime Investigation Services (further called "FCIS").
In brief about the ALT Accounting. Our customers are processing more than EUR 1'bn combined between them. We have decreased company registration time remotely from 4 weeks (20 business days) to 7 business days (1,5 weeks). Licensing/authorization process from 4 weeks to 1-2 weeks** (still depending on the regulator and registry speed). Our incorporated companies by the standard have a bank account with a financial institution that provides them with SEPA, Target2, and global SWIFT transactions, and only if you need more accounts, we can advise for further solutions including local USD, local GBP, local ILS, local RUB, card acquiring, card issuing, etc. upon individual request. Furthermore, for those who don't succeed with the crypto exchange business, we find them a buyer, and we can either handle the service or introduce them to a good, tested advisor. Our vision is to provide Value-added advisory that saves you time.
Article as per the topics
Introduction with the differences between Estonia and Lithuania
Procedure to take from incorporation to the authorization
What is ESI Code (registry extract) and JADIS (shareholder list) explained
How to check if the company is authorized crypto exchange in Lithuania?
Which authority regulates the companies?
What to do if the Regulation is not accepted by liquidity, banking, or other partners?
What details should you collect from your customers?
How to order and from whom to order corporate documents
At the time of this article, ALT accounting has concluded couple dozen of regulated crypto exchange companies via several registration directions. We have experience, restructuring Maltese, Estonian, and United Kingdom-based crypto exchanges, thus meaning they still keep their companies as holding structures and maintain an authorized crypto exchange subsidiary in Lithuania. Lithuania currently offers highly affordable maintenance of the company as low as virtual office rental and accountant costs thus it makes sense to shift away from jurisdictions that are much costlier and with highly regulative environments. Here is one of those comparisons with Estonia and why many move away from Estonia and choose Lithuania.
The AML legislation and directive regulate virtual currency exchanges in a similar way as the Estonian FIU until the 30th of October, 2021, however, Estonia will have a tough local restriction to limit with a local director, compliance officer, physical office, etc. And on top of it, Estonia is the highest-paid by salary count in Baltics, which is furthermore a pushback. The most recent AML legislation in Lithuania directly recognizes and defines activities with virtual currencies and how they shall be treated. Thus the director is the decision-maker, the Money Laundering Reporting Officer (further called "MRLO") is not limited to a certain jurisdiction, and headquarters can be located globally - should you benefit from the best talent either in India, Australia, Brazil, Canada, Kenya, Dubai, Switzerland, or Lithuania, anywhere other than sanctioned or black listed countries will count.
The great benefit of Estonia has been the e-residency, and indeed it still is, if you visit once, you apply for the e-residency and voilà you can register and manage the Estonian company with the card. It is the same in Lithuania, should you visit the country once and with prompt assistance, you will be able to apply for a local e-signature based on your Passport details, therefore, covering the same tasks. Further to this, the process of appointing a Power of Attorney, thus that your accountant can easily order corporate documents, change company name, etc. is simpler than in Estonia.
Should you we consider above discussed - cost of local director/compliance person, physical office, high salaries, and e-capabilities, Lithuania covers them all eloquently. Therefore, if we take this topic further, consider the registration procedures.
To choose ALT Accounting your Registration process has a choice of either Option 1 via Power of Attorney with Apostille or Option 2 via Share transfer agreement (fastest route).
Procedures we follow:
Gathering information and preparation of documents
In option 1 these documents shareholder or parent company appoints POA with apostille to open a savings bank account and act on behalf of the new owner in front of the company registry. Sign docs at the notary office, apostille and send them to Vilnius;
In option 2 you shall make an order and we will do the rest skipping 2.-7. Points.
The legal representative will sign the Incorporation documents and send them by post (DHL, TNT preferred).
Once the docs are received we will Add the registration address;
Open an accumulative bank account of a newly-founded company and the owner shall need to transfer a share capital of € 2500 in the accumulative account;
Once receiving the certification of deposited share capital from the bank, we will be proceeding with the notary where Signing the foundation documents;
Registering in the Commercial Register of Legal Entities 3-5 business days;
Hand in the shareholder declaration form;
(OPTIONAL) Changing the accumulative bank account into a current one (director must do this after the company is founded and can be used for any non-crypto transactions); however, we do value-added advisory, therefore, we will hold the account at an institution that will allow converting the account to the crypto activity;
OPTION 2 only, Transferring company shares in accordance to the signed share transfer agreement(s) (no apostille or certification needed);
Signing to appoint one of our Lawyers and delivering a POA to represent the company in front of the Bank of Lithuania;
Preparation of AML rules, UBO review, and application for the authorization, thus fulfilling and complying with application forms for the virtual currency and wallet custody operator authorizations;
For your information, we do more than the 2 options, thus be sure to inquire us.
The company is registered and the crypto exchange is authorized, but what now?
The first task - working with ALT Accounting we will further assist to take control of your bank account. During the process, you will need to learn more about how to manage the company and some local slang, such as "ESI code" and "JADIS".
ESI Code (Elektroninių sertifikuotų išrašų) - in a core translation means "an Electronic certified statement". The code is changed on every company amendment and needs to be ordered separately by the registered/authorized representor. The ESI records full company details, with registration data, activity, authorizations, licenses, directors, owners, etc.
JADIS (Juridinių asmenų dalyvių informacinė sistema) - means "Information system for participants in legal entities" in a similar quote to the Shareholder list. Should you be registered via share transfer, the shareholder list is updated, however, if via Power of Attorney, after the incorporation of the company only an official/authorized representor of the company can fill in the JADIS form and thus declared the shareholders.
Next is the understanding and here is most asked questions by our customers in the last few months:
Q: How to check if a company has a valid exchange/wallet operator authorization registration?
A: Currently the only way to check is from the Lithuanian Commercial Registry website at https://www.registrucentras.lt/jar/p/. After submitting company details the main details will be shown by clicking on the small D icon, in case the company has an active license/authorization registration the extract includes - "Pranešimas juridinių asmenų Registro tvarkytojui apie vykdomą virtualiųjų valiutų keityklos operatoriaus ar depozitinių virtualiųjų valiutų piniginių operatoriaus veiklą" which translates into "Notification to the Registrar of Legal Entities about the activities of a virtual currency exchange operator and a virtual currency wallet operator" Q: Which authority in Lithuania regulates the crypto exchange/wallet operator license?
A: The license/authorization application is submitted to the public registers who also perform the UBO review. However, as crypto exchanges are not considered fully pledged financial institutions they are not listed on the Bank of Lithuania website. After the registration is granted, the Financial Crime Investigation Service (FCIS) is responsible for monitoring the company activities and making requests in order to check that all AML/KYC policies are followed per requirements of the law. The FCIS does not publicly publish the list of its monitored entities.
Q: What to do if the Regulation is not accepted by liquidity, banking, or other partners?
A: In the past, we had experienced requests with Kraken and several swiss financial institutions to recognize Lithuanian crypto authorization. ALT Accounting will thus organize a Legal memorandum that confirms your company to be eligible for the legislation and its registration to legally provide virtual currency exchange services. Q: What kind of monitoring does FCIS perform? A: FCIS is the regulatory institution that will be regularly inquiring for various reports from the exchange/wallet operators, for example, the company has to keep up-to-date records of TOP customers list, TOP transactions list, who is the acting MLRO, financial statistics etc. The company must always archive full customer KYC, and keep a database with all transactions by sorting them (client full name incl. passport scan/proof of address, country of residence, customer ID, wallet ID, transaction ID, payment ID, AML scoring, wallet AML Analysis report ID, deposit amount, the expense for liquidity, and company net commission) considering the most recent General Data Protection Regulation. Q: What are AML rules and who prepares them?
A: Subject to a service order we prepare a standard set of AML rules that comply with all applicable legal acts that are connected to your company and submitted to the Bank of Lithuania. These rules describe how the Company will organize and ensure adequate anti-money laundering and counter-terrorism financing procedures. The internal procedures, i.e. how the company exactly follows these rules are to be prepared internally by the company MLRO. Q: Do I need accounting services? A: Yes, each company in Lithuania needs to keep proper accounting records. For the starter package, the company should consider approx. €150 for the setup fee and about €200 per month that includes accounting reports for up to 10 transactions a month (not considering fiat to crypto and crypto-crypto), monthly balance, and representation services. It is important to note that various Lithuanian government authorities (such as the Department of Statistics) may issue requests for the company and in case no accounting nor representation services are set up then the company may be fined.
Q: Can I operate and offer services worldwide with a Lithuanian company that has an exchange and wallet operator license/authorization registration? A: The Lithuanian company with the crypto license does not have restrictions to offer services to clients worldwide subject to following the AML/KYC requirements. However, the Lithuanian license does not have passporting rights and we always recommend performing a full legal review with appropriate regulators if any specific jurisdiction outside of Lithuania is targeted.
Q: How can I order a full corporate documents package that is in English and apostille certified?
A: In Lithuania only an authorized company representative can order corporate documents from the Commercial Registry. Firstly a PoA (regular signature) has to be issued to our team member (unless accounting services are set up with us), the cost for processing with PoA is €50. Then we can process the necessary order. The main package includes full company registry extract, UBO list, and articles of association, for pricing click here. Please note translation fees from Lithuanian to English apply at €18 per page and courier fees apply.
So... do you still have questions, let us give you a value and write to firstname.lastname@example.org and email@example.com for further queries and conference call appointments. Hope to help you soon!