Identifier
Created
Classification
Origin
05VILNIUS28
2005-01-10 14:39:00
UNCLASSIFIED
Embassy Vilnius
Cable title:  

LITHUANIA INCSR (INTERNATIONAL NARCOTICS CONTROL

Tags:  SNAR EFIN KCRM PTER KTFN LH 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 10 VILNIUS 000028 

SIPDIS

STATE FOR INL AND EUR/NB
JUSTICE FOR OIA AND AFMLS
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: SNAR EFIN KCRM PTER KTFN LH
SUBJECT: LITHUANIA INCSR (INTERNATIONAL NARCOTICS CONTROL
STRATEGY REPORT) PART II (FINANCIAL CRIMES AND MONEY
LAUNDERING) 2004-2005

REF: (A) STATE 254401; (B) VILNIUS 01430

-------
SUMMARY
-------

UNCLAS SECTION 01 OF 10 VILNIUS 000028

SIPDIS

STATE FOR INL AND EUR/NB
JUSTICE FOR OIA AND AFMLS
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: SNAR EFIN KCRM PTER KTFN LH
SUBJECT: LITHUANIA INCSR (INTERNATIONAL NARCOTICS CONTROL
STRATEGY REPORT) PART II (FINANCIAL CRIMES AND MONEY
LAUNDERING) 2004-2005

REF: (A) STATE 254401; (B) VILNIUS 01430

--------------
SUMMARY
--------------


1. Money laundering is not a significant problem in
Lithuania. Strict legal and regulatory controls and the
GOL's cooperation with international regulatory
counterparts explain the government's success. The
Lithuanian government increased controls to prevent
financial crimes and money laundering in 2004. It
published regulations implementing earlier parliamentary
statutes passed in 2003. These regulations also expanded
the criteria and rules governing the identification of
suspicious transactions and management of registers
recording them. The proceeds from smuggling, principally
cheap Russian cigarettes for domestic consumption, but also
alcohol, Chinese goods and narcotics, and from VAT fraud
and tax evasion, enter the Lithuanian economy. Such
"predicate crimes" constitute a greater problem for law
enforcement than the consequent money laundering. In 2004,
law enforcement stepped up interceptions of smugglers,
while the Financial Crime Investigation Service (FCIS)
started nine money laundering pre-trial investigations.
FCIS froze over USD 9.6 million in criminal assets in 2004
(first ten months). The FBI reports excellent cooperation
with Lithuanian law enforcement on suspected money
laundering cases. Lithuania is a signatory to numerous
international conventions on money laundering, concluding
four additional agreements with European countries in 2004.
Lithuanian law enforcement officials participated in two
money laundering prevention workshops made possible with
USG assistance in 2004. End Summary.

Sources of Illicit Money
--------------


2. Local experts identify the informal economy, estimated
at 18 percent of GDP, as the most likely source of illicit
money in Lithuania. The flow of smuggled goods,
principally cigarettes and alcohol from Russia and Belarus,
is driven by price differentials between these countries
and Lithuania and the West. A pack of cigarettes in
Lithuania, for example, costs only one-fourth the price of

a pack in the EU. Experts anticipate that smuggling will
increase when Lithuania adopts the minimum EU excise rate
in 2009. The demand for smuggled cigarettes is greatest
domestically, a shift from 2002, when cigarettes transited
Lithuania for Germany and the U.K.


3. Smuggled Chinese goods are also a source of illicit
income, since smugglers underreport the value of the goods
to Customs and the State Tax Administration to avoid VAT
and profit taxes on such goods. Smugglers avoid paying
taxes on the goods by generally selling them at largely
unregulated outdoor markets. Following the removal of
border checkpoints after Lithuania's accession to the EU,
customs officials are only able to inspect Chinese goods if
they receive information to track them down in Lithuanian
warehouses.


4. VAT fraud is a third source of illicit income. Experts
note that VAT revenues are not increasing proportionally to
retail sales. In 2003, for example, VAT revenues
constituted 6.7 percent of GDP, whereas in 2002, they
constituted 7.5 percent of GDP.

--------------
LAW ENFORCEMENT ACTIVITY
--------------

Smuggling
--------------


5. Customs reports that it initiated 114 pre-trial
investigations against smugglers in 2004, up from 101 in

2003. The agency provided a partial breakdown of these
investigations:

-- 33 investigations related to smuggling into Lithuania;
-- 30 cases addressed a failure to re-export goods from
Lithuania; and
-- 13 investigations addressed document forgery.
According to Customs data covering the first nine months of
2004, the four top categories of smuggled goods, in terms
of total value of goods intercepted were:

-- Tobacco products, worth LTL 654,624 (USD 251,778),up
from LTL 644,644 (USD 247,940) during the same period in
2003;

-- Stolen cars, worth LTL 400,000 (USD 153,846),down from
LTL 1,246,097 (USD 479,268) during the first nine months of
2003;

-- Chinese goods, worth LTL 114,222 (USD 43,931),down from
LTL 10,298,688 (USD 3,961,033) during the first nine months
of 2003; and

-- Metals, worth LTL 73,000 (USD 28,077),down from LTL
92,000 (USD 35,384) during the first nine months of 2003.


6. Customs says that the major category of contraband it
intercepts is cheap Russian cigarettes smuggled in from
Kaliningrad. It reports that small groups of mainly
Lithuanian, but also Russian and Belarusian, smugglers
control this trade. This is a significant change from the
situation before 2002, when large criminal groups
controlled this illegal activity, and smuggled goods exited
Lithuania for Western countries in exchange for illegal
cash entering Lithuania. A Border Guard press release
stated that the agency had confiscated a record 3.2 million
packs of smuggled cigarettes at the borders in 2004, up
from 1.6 million packs in 2003, and 467,000 packs in 2002.
The breakdown of the 2004 seizures is as follows:

-- 2.4 million packs at the border with Kaliningrad;
-- 540,000 packs at the Belarussian border; and
-- 288,000 packs at the Latvian border.

The Border Guards noted that smuggled cigarettes are sold
at two or three times the purchase price in the black
market, which is only half the legal price at shopping
centers.


7. Customs also reports that it initiated four pre-trial
investigations against alcohol smugglers in 2004. The
largest seizure of 2004 occurred in September along the
Polish border and involved 26 tons of spirits of Belarusian
origin. Customs launched four pre-trial investigations
(down from twelve cases in 2003) against criminals
smuggling stolen cars from Western Europe. In 2004,
Customs started 52 pre-trial investigations against
suspects smuggling Chinese goods into Lithuania, and
another 30 cases against individuals who had broken their
commitments to re-export Chinese and Turkish goods to
Latvia.

VAT Fraud
--------------


8. In November 2004, the press reported that the FCIS
intercepted a well-organized criminal gang, which had
defrauded the state budget of more than LTL seven million
(USD 2.7 million) in VAT revenues. During 2003-2004, the
group had established more than 30 shadow companies,
according to FCIS, trading in timber, metal and other
products. Press reports state that FCIS seized LTL 200,000
(USD 76,923) in cash, a dozen plastic bankcards, and
falsified accounting books. The agency froze a large
proportion of the criminal group's property valued at LTL
four million (USD 1,530,000).

Narcotics
--------------


9. The sale of narcotics does not generate a significant
portion of financial crime and money laundering activity in
Lithuania. FCIS reported no cases of money laundering
related to narcotics in 2004. Customs reported that it
started ten pre-trial investigations against narcotic
smugglers in 2004, the same number as in 2003. Law
enforcement authorities estimate that the domestic drug
trade is worth LTL 500 million (USD 200 million) per annum
and is growing. Lithuanian organized crime groups have
begun to penetrate the German narcotics market. Heroin is
smuggled into Lithuania from Central Asia and the Balkans.
Cocaine imports from South America travel through Western
Europe into Lithuania. Poppy straw is especially popular
in the countryside, and is smuggled to the Kaliningrad
district of Russia.

Cash Couriers
--------------


10. Customs reported three seizures totaling LTL 69,620
(USD 26,778) during the first nine months of 2004, down
from LTL 150,706 (USD 57,964) during the same period in

2003. On January 7, 2004, the Border Guards detained a
Belarusian national on charges of smuggling LTL 123,000
(USD 47,307) and on December 14, another Belarusian
national was detained for carrying USD 30,000 in cash.

Money Laundering: Nine pre-trial investigations underway
-------------- --------------


11. There are no precise estimates regarding the scale of
money laundering in Lithuania. One expert opined that
money laundering is anywhere between LTL 10-100 million
(USD 4-40 million) per year, but this is probably a low
estimate, when viewed in the context of the size of the
informal economy (LTL 10 billion, USD 3.8 billion)).
Prosecutors launched criminal proceedings in nine suspected
cases of money laundering, and seven additional cases of
suspected tax evasion, document forgery, and smuggling.
FCIS reported no convictions for money laundering in 2004.
The nine suspected money laundering cases arose in part
from FCIS-led investigations into 119 suspicious bank
transactions, out of a total of more than one million
transactions during the first ten months of 2004. Banks
reported 65-70 of the suspicious transactions, while the
balance were identified by FCIS.


12. Authorities did not launch a single investigation
against bank officials for complicity in money laundering
in 2004. Regulatory authorities exercise tight supervision
of the country's ten commercial banks, two foreign bank
branches and 58 credit unions, and laundering cash through
the banking system is a high-risk activity. FCIS stated
that although there were many cases of credit card fraud,
none were related to money laundering. The Police report
that financial crimes constituted four percent, fraud
accounted for three percent, and the production of
counterfeit currency slightly above one percent of all
crimes committed in 2004.


13. Lithuania has good laws that have created adequate
legal safeguards against money laundering. Experts observe
that GOL controls in the banking sector are adequate, and
that the banking system, largely Scandinavian-owned, is
vigilant against potential launderers. They opine that the
GOL dedicated adequate funds in 2003-2004 to its three law
enforcement agencies (FCIS, Border Guards, Customs)
responsible for combating money laundering. FCIS's 2004
budget increased by 23 percent over 2003, while the
Customs' budget decreased by 13 percent. The experts
highlight, however, some deficiencies in law enforcement
measures, such as a lack of adequate cooperation and
information exchange among these agencies at the regional
level, inadequate training of officers, and corruption at
the regional level. Additionally, following EU accession,
Customs officials no longer routinely inspect goods at
border posts with neighboring EU states, relying instead on
mobile units to patrol the border. The GOL currently has
13 mobile units, and plans to establish an additional ten
by the end of January 2005.
Real Estate - a potential venue to launder money?
-------------- --------------


14. Experts identify real estate purchases as a potential
venue to launder money. The State Tax Administration
checks the income and property declarations of categories
of high-spending individuals, such as those purchasing
expensive real estate, jewelry, furniture or other luxury
goods worth more than LTL 50,000 (USD 19,230),and large
donors to election campaigns, and matches them with
expensive purchases. The agency told us they have many
sources to gather this information, such as inspection of
Lithuania's single Real Estate Register, information from
construction companies and real estate agents, and review
of the largest luxury good stores' records. From January
1, 2004, all taxpayers must submit one annual income and
property declaration. Before this change, only those
purchasing property with a value in excess of LTL 46,000-
50,000 (USD 17,700-19,230),politicians, and business
managers were obliged to submit these declarations. The
tax inspectorate has closed the loophole that enabled
potential launderers to purchase property in Lithuania
worth less than the threshold, using illegal-source monies,
without declaring the purchase or accounting for the source
of the funds. The agency told us that its data for 2004
would only be available after the tax submission deadline
of May 1, 2005.


15. Lithuanian officials and financial institutions do not
encourage or facilitate money laundering or narcotics
trafficking. Lithuania is not an offshore or regional
financial center. The State Tax Administration informed
us, however, that it has encountered cases of Lithuanian
companies purchasing goods in Russia at lower prices, then
attributing higher prices to offshore companies outside
Lithuania, such that the Lithuanian companies are able to
conceal the illicit profit they make.

-------------- ---
LAWS AND REGULATIONS TO PREVENT MONEY LAUNDERING
-------------- ---


16. Money laundering is a criminal offence punishable by
up to seven years in prison. The Lithuanian parliament, on
January 29, 2004, amended the definition of money
laundering in Article 216 of the Criminal Code. The law
now defines a money launderer as "any person who carries
out financial operations with his own or another person's
money or property or with part of them knowing that such
money or property acquired in a criminal way, concludes the
agreements, uses them in economic or commercial activity,
or makes a fraudulent declaration that they are derived
from legal activity, for the purposes of concealing or
legitimizing these proceeds shall be punished by
imprisonment for a term of up to 7 years. Enterprises
shall also be held liable for the acts specified in
paragraph 1 of this Article."

Reporting Requirements
--------------


17. Amendments to the law on the Prevention of Money
Laundering went into effect on January 1, 2004. FCIS now
has the authority, upon receiving a report of suspicious
financial activity, to direct financial institutions to
freeze an account for 48 hours without prosecutorial
intervention. Article 9 of the Money Laundering Prevention
Law requires financial institutions and other entities
(auditors, insurance companies, investment companies, book-
keeping companies and notaries) to report to the FCIS
suspicious transactions of any size and the identity of
clients involved within three hours of detecting such
activity. The FCIS may extend the freeze during an
investigation.


18. The GOL published four regulations in 2004 to
implement the new requirements of the Law on Money
Laundering.
-- In July, the Cabinet expanded the criteria to identify
suspicious money operations. The new list includes 25
detailed criteria, such as an unusual increase in cash
payments, cashing LTL 100,000 (USD 40,000) or more within
seven days, splitting a cash transaction into a number of
transactions in order not to reach the LTL 50,000 (USD
20,000) threshold, and cashing more than LTL 100,000 (USD
40,000) in seven days using a foreign credit card.

-- The Cabinet also adopted new rules in July to identify
persons involved in suspicious transactions, and on
transferring this information to FCIS. The regulation
establishes a list of data and documents that a bank or
another financial institution must request from a person
whose identity must be established in accordance with the
Law on Money Laundering.

-- In July, the Cabinet adopted detailed rules governing
the management of registers of suspicious money
transactions, and transactions exceeding LTL 50,000 (USD
19,230).

-- On November 15, the Cabinet approved new "Rules on
Stopping Suspicious Money Operations and Providing
Information to the Financial Crime Investigation Service
(FCIS) at the Ministry of Interior." These rules entitle
FCIS to request any legal or natural entities, except
notaries, to freeze suspicious money operations for 48
hours upon receiving an FCIS order, unless such action
would inhibit the investigation of suspicious money
transactions. All entities except notaries are required to
freeze such operations if they notice them, and to appoint
individuals who will be responsible for monitoring money
operations and who can freeze suspicious operations. All
entities except notaries must report details on all such
operations to FCIS within three working hours after
freezing the suspicious operations.

Large Transactions
--------------


19. The law on money laundering requires financial
institutions to identify and report to the FCIS within
seven days any transaction exceeding LTL 50,000 (USD
19,230). The law also requires financial institutions to
maintain a register of customers who engage in transactions
exceeding LTL 50,000 (USD 19,230),or its equivalent in
foreign currency, and to retain records for a minimum of
ten years. The press, however, has criticized the
requirement to report transactions exceeding LTL 50,000
(USD 19,230). Banks are aware of their reporting
requirements and although not very happy about the new
reporting burden imposed on them, have been very
cooperative and report and exchange information of their
own accord, not only upon request of the FCIS.


20. Although Lithuanian law provides for confidentiality
of commercial banking information, Article 16.4 of the
Money Laundering Prevention Law protects bankers who report
required information to the FCIS. The "Law on the
Financial Crime Investigation Service" of March 28, 2002
authorizes FCIS to collect information from financial
institutions.

Cross-border Currency
--------------


21. The law requires that individuals must declare to
Customs cash they transport into or out of the country in
excess of LTL 10,000 (USD 3,846). Following Lithuania's EU
accession, this requirement applies only to individuals
from third (i.e. non-EU) countries. Customs authorities
must report to the FCIS as soon as possible, and no later
than within seven working days, incidents where a person
enters or departs the country transporting cash in excess
of LTL 50,000 or equivalent (USD 19,230). Customs has
primary responsibility for border checks, the Border Police
perform periodic checks, and the FCIS provides consultation
support, as necessary.

Other Reporting Requirements
--------------

22. The amendments to the Law on the Prevention of Money
Laundering require that insurance companies identify
customers whose annual insurance payment exceeds LTL 8,500
(USD 3,269). Casinos must register patrons who wager, win,
or exchange for chips amounts larger than LTL 3,500 (USD
1,346). Although they are not obliged to report this
information, FCIS tells us that they usually do. Casinos
are required to report any suspicious transactions and any
transactions exceeding LTL 50,000 (USD 19,230).


23. The amendments also require lawyers to notify the
lawyers' association about clients' suspicious
transactions, and that the association inform the FCIS
within three working hours of notification. The lawyers'
association must maintain a register of suspicious
transactions and maintain relevant records for ten years.
Lawyers protested that the new reporting requirements
violate attorney-client privilege. No other groups have
voiced substantive objections about the new legislation.

Record-keeping Requirements
--------------


24. Banks and other financial institutions are required to
maintain records for ten years "after they break contact
with the customer." FCIS interprets this to mean ten years
following the customer's last transaction. Banks also
retain information on the identity of an account owner ten
years following the closure of the account.

Bankers' Obligations
--------------


25. The Code of Administrative Violations imposes a fine
of LTL 2,000 (USD 769) on bank officers who negligently or
inadequately identify and report money laundering in their
institutions, or who do not keep the required records.
Bank officials who are suspected of complicity in money
laundering are subject to criminal prosecution and
imprisonment of up to seven years under Article 24 of the
Criminal Code. The Central Bank may withdraw a bank's
license for violating procedures designed to prevent money
laundering.

Witness Protection
--------------


26. Prosecutors and pretrial investigation officers may
grant witnesses anonymity, per the Criminal Process Code
(Articles 198, 199). The Court protects the anonymity of
witnesses under threat to life, health, freedom, or
property, or when the witness's testimony is critical to
the case. There were no reports of retaliatory actions
taken by traffickers or organized crime specifically
related to money laundering investigations. There have
been minor incidents of vandalism of police officers' homes
and cars, but these were not specific to money laundering
investigations.

--------------
TERRORIST FINANCING
--------------


27. The GOL has independent national authority to freeze
assets linked to terrorism. The amended Law on the
Prevention of Money Laundering defines terrorist financing
as an "activity by means of which individuals intentionally
use money or other assets received by criminal or other
means for the direct or indirect funding of terrorism."
Article 9 of this law authorizes FCIS to freeze suspicious
assets (including those related to terrorism) for a period
of up to 48 hours, after which period, procedures outlined
under the Code on Penal Procedure apply. Article 72 of the
Criminal Code permits confiscation of assets that served as
the tool, or represent the result, of a crime. Article 250
of the Criminal Code, which came into force on April 10,
2003, establishes financing terrorist acts as a crime, and
prescribes imprisonment of between 4-20 years.

28. In 2003, Lithuania ratified the International
Convention for the Suppression of the Financing of
Terrorism, which came into force on March 22, 2003. In
April 2004, the Parliament passed a law on the
"Implementation of Economic and Other International
Sanctions" which makes international financial sanctions,
including UN sanctions against terrorists, valid in
Lithuania, and charges MFA with taking the lead in
overseeing their implementation. It also clarifies the
role of other GOL agencies, such as FCIS, Customs, the
Insurance Authority, and the Stock Exchange Commission, in
this process. The law provides that the Lithuanian Cabinet
establish and amend, by resolution, implementation of
international sanctions. Provisions of the law apply to
the actions of Lithuanian legal and natural persons in
foreign countries, irrespective of whether foreign
countries implement international sanctions as applied by
Lithuania. Lithuania does not have an "all serious crimes"
anti-money laundering law.


29. The State Security Department is the lead GOL agency
coordinating efforts against terrorism. Together with
FCIS, it circulated to financial institutions the names of
all terrorist individuals and entities on the UN 1267
Sanctions Committee's consolidated asset freeze list and/or
whom the USG has designated and whose assets it has frozen,
for names which we provided to the GOL on a non-close-hold
basis. For names provided on a close-hold basis, FCIS
informed us it did a thorough search in its database. The
government has provided no indication that its searches in
2004 have yielded any evidence of terrorist assets.


30. Charitable and non-profit entities do not play a role
as conduits to finance terrorism. Alternative remittance
systems do not exist in Lithuania. A press report noted
that a Catholic priest accepted a donation of LTL 5-10
million (USD 1.9-3.8 million) in November 2004 in violation
of internal Church regulations that require the approval of
a bishop for donations of more than LTL 10,000 (USD 3,846).
The Church has started an internal investigation into this
matter, while the parliamentary budget committee debates
how best to regulate charities.

--------------
FREE TRADE ZONES
--------------


31. Lithuania has Free Economic Zones (FEZ) in the cities
of Klaipeda, Kaunas and Siauliai. Klaipeda is the
country's largest seaport, Kaunas is an air, road, and rail
hub, and Siauliai hosts the largest airport in the Baltics.
There are currently four businesses operating in the
Klaipeda FEZ. This largest of Lithuania's zones, with 130
million euros (USD 174 million) in total foreign
investment, has signed contracts with four more enterprises
to begin operations in 2005.


32. Companies operating in the FEZ receive the same legal
guarantees as those operating elsewhere. Parliament
approved a law on the fundamentals of free economic zones
on June 28, 1995 that regulates conditions for the
establishment of free trade zones and the legal status of
firms operating in such zones. Lithuania's EU Accession
agreement permits the indefinite operation of existing
FEZs, but precludes the establishment of new ones.
Businesses operating in the zones enjoy the following
advantages:

-- 80 percent corporate tax reduction for the first five
years of operation, and 50 percent for the next five years;

-- Exemption from customs taxes;

-- Exemption from Value Added Tax; and
-- A 50 percent discount on land leases.

FCIS has no indication that any of these free trade zones
are being used in trade-based money laundering schemes or
by the financiers of terrorism.

--------------
INTERNATIONAL COOPERATION
--------------


33. Lithuanian law enforcement cooperates with the USG in
investigations and the exchange of information related to
money laundering, financial crimes, terrorist financing and
customs issues. The Lithuanian FCIS exchanges information
with the U.S. Financial Crimes Enforcement Network, the
Federal Bureau of Investigation (FBI),and the Internal
Revenue Service of the U.S. Department of the Treasury on
suspicious financial transactions, and carries out joint
investigations of money laundering cases. FBI states that
it has had excellent cooperation with law enforcement
agencies in Lithuania. In 2004, FCIS responded to five FBI
and FinCen requests in 2004 for cooperation on money
laundering and fraud cases, while FBI responded to several
FCIS requests concerning individuals and businesses
possibly associated with money laundering and fraud. The
police and FCIS continue to cooperate with U.S. law
enforcement bodies on a significant Russian Organized
Crime/Money Laundering investigation. Through Mutual Legal
Assistance Treaty (MLAT) and other requests, Lithuania
provided bank records and other evidence to the United
States to be used at trial. Lithuania allowed bank
officials to travel to the United States in 2004 to testify
at trial. FBIHQ is reviewing an FCIS proposal in 2004 for
a Memorandum of Understanding between the two agencies to
clarify their relationship.


34. Lithuanian authorities exchange records in connection
with investigations and proceedings relating to terrorist
financing and other crime investigations. The USG-GOL
MLAT, which entered into force in 1999, provides a
mechanism for formal exchange of records. Lithuania
voluntarily exchanges with the United States information
regarding on-site examinations of banks and trust
companies. FCIS joined the Egmont Group of Financial Crime
Investigative Units in 1999, whose primary objective is to
provide a mechanism to exchange information in a timely and
secure manner to further the fight against money
laundering. FCIS joined the Egmont Secure Web in December
2003, permitting communication via secure email, including
the posting and assessing of information regarding trends,
analytical tools, and technological developments. In
addition to Egmont, GOL officials exchange records via
Interpol, and FBI, Customs and Internal Revenue Service
liaisons. The Lithuanian government has not refused to
cooperate with USG agencies on important cases.


35. Law enforcement is working with other countries on
significant organized crime money laundering
investigations. FCIS signed four agreements in 2004
covering cooperation against economic and financial
crimes, money laundering, and exchange of information
with the European Anti-Fraud Office, the Azerbaijan
Revenue Service, the Italian Guarda di Finanza, and the
Estonian Tax and Customs Board. Nine Memoranda of
Understanding on cooperation for exchanges of financial
intelligence information were signed with Financial
Intelligence Units (FIU) from Belgium, Bulgaria, Croatia,
the Czech Republic, Estonia, Finland, Latvia, Poland and
Slovenia between 1999-2003. Lithuania and Germany signed
an agreement in 2001 to cooperate in the fight against
organized crime and terrorism.


36. USG assistance has provided advanced training to combat
money laundering, including terrorist financing, and
organized crime. The East-West Management Institute
(EWMI),a not-for-profit organization that promotes
economic and legal reform in countries making the
transition to a free-market economy, conducted the
following workshops and seminars with USG assistance:

-- A "Regional Workshop on Prevention of Money Laundering"
(for law enforcement institutions) in Tallinn, Estonia, on
June 10-11, 2004. Lithuanian participants included two
Supreme Court judges, two prosecutors and two FCIS
officials;

-- A "Regional Workshop on Prevention of Money Laundering"
(for law enforcement institutions) in Vilnius on February
26-27, 2004. Lithuanian participants included six FCIS
representatives, two judges, nine prosecutors and the
Deputy Director of the Ministry of Justice's International
Law Department. In addition, there were participants from
Estonia, Latvia, and Ukraine;

-- In January 2003, EWMI organized a study tour to the
United States for representatives of the three Baltic FIUs.
Three FCIS officials traveled to the United States to meet
with FINCEN, the U.S. FIU, to discuss money laundering;

-- A "Regional Workshop on the Prevention of Money
Laundering" (for law enforcement institutions) in Gdansk,
Poland, on May 22-23, 2003, which served as a forum for
specialists in financial crime to discuss cases and
exchange opinions about the current situation in the field.
Lithuanian participants included two prosecutors and one
judge. There were investigators, judges and prosecutors
from Estonia, and Latvia as well;

-- A seminar on "Prevention of Money Laundering" (for banks
and financial institutions) in Riga, Latvia, on October 30,
2001; and

-- A seminar on "U.S. and Foreign Banks' Compliance with
the US Patriot Act" (for banks and financial institutions)
in Riga, Latvia, on October 30, 2002.

In addition, the USG and the GOL signed a letter of
Agreement on Law Enforcement on September 30, 2003, under
which the United States agreed to provide training and
equipment to the Lithuanian police to combat currency
counterfeiting. The USG provided USD 325,000 in
surveillance equipment in 2003, pursuant to a Letter of
Agreement signed on March 22, 2002, to combat corruption.


37. Lithuania is a signatory to the 1988 International
(Vienna) Convention against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances, which it ratified on
March 12, 1998. It is also party to the 1990 Council of
Europe (Strasbourg) Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds from Crime, which
it ratified in 1994. On December 9, 2003, Lithuania's
Parliament ratified the International Convention for the
Suppression of Terrorist Bombings. The country adheres to
the recommendations of the Financial Action Task Force and
relevant EU policy directives. The 2003 amendments to the
Law on the Prevention of Money Laundering incorporated
recommendations from EU policy directives issued in 1991
and 2001.

--------------
ASSET FORFEITURE AND SEIZURE LEGISLATION
--------------


38. Pretrial investigation agencies (police, FCIS,
Customs, secret police) are responsible for tracing assets.
A prosecutor may prohibit individuals suspected of
involvement in money laundering or other financial crimes
from disposing of property for a period of up to six
months. Freezing assets for a longer period requires a
court order. The court can seize only property which the
criminal or his/her accomplice used as an instrument of a
crime or a means to commit a crime or which was acquired as
the direct result of a criminal act. The court may seize
assets in order either to ensure the possibility of
forfeiture in criminal cases or to secure a judgment in a
civil action. Upon conviction of money laundering or
terrorism financing, an individual may be subject to fines,
restrictions on operation of his/her company, or
liquidation of property.


39. The FCIS froze over LTL 25 million (USD 9.6 million)
in assets during the first ten months of 2004. In 2003,
the FCIS froze over LTL 52 million (USD 20 million) in
assets, and in 2002, LTL 35.1 million (USD 13.5 million).
There are no figures available for the total value of
forfeited crime-related assets. The police lack adequate
resources to perform property seizures.

Disposition of Assets
--------------


40. Proceeds from seizures and forfeitures go into the
national budget, except for armaments, which go into the
national weapons fund. The police destroy seized
narcotics. Enforcement actions led to LTL 6.5 million
(USD 2.5 million) in seized drugs in 2004. Lithuania does
not share crime-related assets with other governments.
Seizures and forfeitures of assets have not generated a
public or political reaction. Following passage of the
Criminal Process Code in 2003, the government is not
currently considering other legislation on seizure and
forfeiture.


41. The public and business community are supportive of
GOL efforts against money laundering, so long as these
measures are undertaken in a transparent manner.

MULL