FinTech disputes in Lithuania: regulatory and client risks

Lithuania is an important EU jurisdiction for Electronic Money Institution (EMI) and Payment Institution (PI) licensing. An EMI or PI license may support access to the European market, but it also brings continuous supervision, AML/KYC duties, safeguarding rules, and consumer protection expectations.

This is why FinTech disputes in Lithuania often arise in two directions: with the Bank of Lithuania on one side, and with clients or partners on the other — including account holders whose accounts have been frozen or closed. The first step is to decide whether the issue is a compliance gap or a contestable regulatory position.

Why do FinTech companies in Lithuania face disputes?

Disputes arise because a FinTech company in Lithuania operates in a supervised, cross-border, and fast-developing environment. Therefore, what initially appears to be an operational problem (e.g., late payment, customer onboarding issues, dispute with a partner, etc.) can very quickly escalate into something much more serious.

The main risk drivers are AML/KYC compliance, international clients, high transaction volumes, and payment service provider (PSP) and banking relationships. As a result, financial services disputes in Lithuania often sit between regulation and contract law.

Regulatory disputes with the Bank of Lithuania

Regulatory disputes with the Bank of Lithuania usually arise when the regulator questions licensing, AML, governance, or reporting obligations. Common areas include customer due diligence, transaction monitoring, safeguarding of client funds, outsourcing, and license conditions.

For an EMI or PI, findings may lead to explanations, remedial measures, activity restrictions, enforcement action, license suspension, or license revocation. The company may explain its position, agree on corrective actions, or challenge a decision. A supervisory decision of the Bank of Lithuania may be appealed to the Regional Administrative Court within one month, and, as a rule, filing an appeal does not suspend the contested decision – although decisions imposing statutory penalties are treated differently, and the court may order interim measures.

Clear documentation helps show what happened, why decisions were made, and how risks were managed.

Client and commercial disputes

Disputes with clients and commercial counterparties can occur due to funds being frozen, payments being on hold, chargebacks, account restrictions, service disruptions, and disagreements with Payment Service Providers, banks, and technology partners.

A client-facing restriction may be driven by a regulatory obligation. When a FinTech freezes funds to meet AML duties, the client may see it as a service failure. The company may be responding to risk indicators and should be able to show why the restriction was applied. Where the client is a consumer, the dispute may also be referred to the Bank of Lithuania, which acts as an out-of-court dispute resolution body for disputes between consumers and financial market participants.

Frozen accounts and account closures: recovering client funds

Not every FinTech dispute involves the licensed institution itself. A significant and growing number of disputes are brought by the account holders – individuals and businesses – whose accounts have been frozen, restricted, or closed by a bank, EMI, or PI operating under a Lithuanian licence. Because many well-known neobanks and e-money institutions are licensed in Lithuania, these disputes are frequently governed by Lithuanian law and can be pursued through Lithuanian complaint, supervisory, and court channels.

A freeze or closure is often triggered by AML/CTF checks, sanctions screening, unexplained source-of-funds concerns, or the institution’s terms of service. The institution may be limited in what it can disclose, and a restriction may also stem from an order by a competent authority – for example, a transaction suspension under AML rules – rather than the institution’s own decision. Either way, client funds that are not subject to a lawful freezing order should ultimately be released, typically by transfer to an account held in the client’s name at another financial institution.

For account holders, the practical goals are usually to obtain the legal basis for the restriction, to secure the release of the frozen funds, and to have those funds transferred to an account at another institution. The route depends on the client’s status and the contract: consumers may escalate to the Bank of Lithuania as an out-of-court dispute resolution body, while businesses more often proceed through formal complaints, negotiation, and, where necessary, civil claims to recover the funds. Acting early – and documenting every request and response – materially improves the prospects of recovery.

AML/KYC and compliance-driven disputes

Many FinTech disputes can be traced back to AML or KYC processes. Ineffective onboarding, incomplete checks on source of funds, lack of transparency around risk scores, and inconsistent monitoring of transactions put the firm at risk on both a regulatory and client-facing basis.

Delayed enhanced due diligence may trigger additional scrutiny from regulators. Broad limitations on activity and communication may trigger client complaints. In both cases, the lack of adequate internal records will make any subsequent defense more difficult; escalation notes and communication logs will serve as key evidence.

When a FinTech dispute becomes litigation or arbitration

A FinTech dispute becomes litigation or arbitration when complaints, negotiations, or corrective measures no longer resolve the issue. In many FinTech disputes in Lithuania, it is important to check the contract and its terms before escalating. Look for the jurisdiction clause, arbitration clause, governing law, and any mandatory pre-dispute steps, and gather the relevant evidence. The regulatory context should also be assessed, especially where the dispute involves client funds, AML/KYC obligations, or supervisory requirements.

FinTech litigation should be approached strategically. Settlement may sometimes protect the business relationship better than formal proceedings. In other cases, litigation or arbitration may be necessary to recover funds, defend contractual rights, or protect a regulatory position. Guidance on dispute resolution in Lithuania can help connect legal procedure with commercial strategy.

How can FinTech companies reduce dispute risk?

The best dispute strategy often starts before the dispute exists. FinTech companies can reduce risk through clear AML/KYC procedures, well-drafted client and partner agreements, documented decision-making, and a response plan for regulatory inquiries.

For complex financial services disputes in the Baltics, early legal assessment can help prevent a manageable issue from becoming a wider regulatory or litigation problem. More information on resolving financial services disputes may be relevant where FinTech, regulatory, and commercial risks overlap.

FAQ

What types of disputes do FinTech companies in Lithuania face?

FinTech companies in Lithuania typically face two types of disputes: regulatory disputes with the Bank of Lithuania, which concern AML/KYC compliance, license conditions, and other regulatory requirements, and commercial disputes with customers or business partners, which concern payment matters (e.g., frozen funds, chargebacks) and customer complaints. These two types of disputes often overlap: a customer-facing decision may be driven by a regulatory requirement or by risk considerations.

Can a FinTech challenge a Bank of Lithuania decision?

In certain cases, yes. A FinTech has options for responding to findings, providing additional information, proposing solutions, and contesting decisions. Initially, a FinTech will need to assess whether the identified issue is a compliance matter that can be fixed or a decision that can be challenged before the administrative courts on legality and proportionality grounds.

Why are client funds frozen, and is it a dispute?

Client funds are often ‘frozen’ because of AML requirements, sanctions checks, or other risk monitoring requirements of the FinTech. Client disputes can arise when the client disagrees with the reasons for a restriction, the scope of the restriction, or the time for which a restriction is in place. Disputes can also arise when the FinTech’s communication is unclear, and the client believes that their funds are being restricted without sufficient reason.

When does a FinTech dispute go to court or arbitration?

A FinTech dispute usually proceeds to court or arbitration if negotiations and attempts to settle a dispute by way of complaint fail. Depending on the contract, the evidence available, the dispute resolution clause, and the strategic value of the matter at hand, it will then be decided whether a formal procedure, be it to claim back money, to assert and defend contractual rights, or to safeguard the company’s regulatory position, is required.

How can FinTechs reduce the risk of disputes?

There are several ways in which a FinTech can seek to mitigate the risk of disputes: by implementing adequate AML/KYC processes and by having adequate contracts in place; by keeping a record of all decisions made and by seeking early legal advice as required. It is also important to have a plan in place for dealing with any regulatory inquiries as well as client complaints. It is also important to ensure consistency in terms of how situations such as frozen funds, suspended payments, and unusual client activity are handled by internal teams so as to avoid additional exposures of a regulatory and commercial nature.

My account was frozen or closed by a financial institution in Lithuania – how do I get my money back?

Start by requesting, in writing, the reason and legal basis for the freeze or closure and the timeline for releasing your funds and keep every message and reference number. If the institution is licensed in Lithuania and you are a consumer, you can escalate the dispute to the Bank of Lithuania, which acts as an out-of-court dispute resolution body; business clients usually proceed through formal complaints, negotiation, and, if needed, a civil claim. Funds that are not subject to a lawful freezing order should generally be returned, normally by transfer to an account in your name at another institution. Because deadlines and outcomes depend on the contract, your status, and whether an authority has ordered the freeze, early legal advice can significantly improve the chances of recovering the funds.