Significant ruling on sanctions compliance liability in Lithuania’s financial sector

A significant case for Lithuania’s financial sector regarding liability for the implementation of international sanctions, anti-money laundering and counter-terrorist financing measures has been completed – Ellex in Lithuania successfully represented one of the commercial banks operating in Lithuania in a dispute concerning a suspended payment.

The legal dispute arose from a payment initiated in February 2022 from an account at a Russian bank that was not transferred to the account of a company registered in Lithuania. In compliance with anti-money laundering requirements, the payment was suspended and reviewed, during which international sanctions were imposed on the bank from whose client account the payment had been initiated.

The claimant (a company registered in Lithuania whose account did not receive the payment) argued that the commercial bank operating in Lithuania was obliged to execute the payment, that the AML screening was excessive and too lengthy, and sought compensation for alleged damages and interest.

After examining the case, the appellate court upheld the decision of the court of first instance, which had fully dismissed the claim. The court found that the defendant had both legal and factual grounds to carry out additional checks on the payment and subsequently to refuse to process it.

This ruling is significant for the practice of financial institutions, as it strengthens legal clarity regarding the assessment of actions taken by financial institutions (and other entities implementing international sanctions) in situations where the sanctions environment changes rapidly and decisions must be made in real time under uncertain conditions. The decision confirms that the obligation of financial institutions to ensure compliance with international sanctions includes not only formal reactions to already imposed sanctions, but also active and independent risk assessment.

The defendant was represented in court by Ellex Lithuania lawyers Edvardas Racius and Neringa Mickevičiūtė. Ieva Gruzdytė also worked on the case, and Kristina Saukalienė contributed during the appellate stage.

“This is an unprecedented case in which the liability of a financial institution was assessed in the context of anti-money laundering requirements and the application of international sanctions in a particularly sensitive situation, where a payment from an entity registered in Russia was initiated seven days before the start of the war in Ukraine. The ruling establishes clear practice regarding the limits of financial institutions’ liability when intermediary banks – rather than the parties to the transaction – are sanctioned. In this case, neither the payer nor the payee was sanctioned; instead, the intermediaries within the financial system were sanctioned (the bank from which the payment was initiated and the correspondent bank through which the international payment was processed to an account in Lithuania),” comments Edvardas Racius, Associate Partner and Attorney at Ellex Lithuania.