Importance of AML Compliance in Estonia | AML Officer
Why is AML Compliance Important?
Anti-Money Laundering policies and procedures exist to help financial institutions combat money laundering by stopping criminals from engaging in transactions to disguise the origins of funds connected to illegal activity. The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion in current US dollars. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle, and it is estimated that only 1% of laundered money is discovered.
The importance AML compliance mainly comes from the fact that there are always new Anti-Money Laundering laws, policies, and regulations being established on a local and a global level which dictate the standards in the financial industry. These new laws are introduced because there are loopholes in the industry that criminals can potentially exploit to avoid paying taxes, launder criminal proceeds, and finance terrorism.
The goal of compliance itself is to conform to the rules set out by relevant regulators so that all necessary governance requirements are met without an unnecessary cost of resources and effort. Failure to comply with such regulations usually end with punitive fines, criminal proceedings, damaged reputations and not being able to operate. In 2020 alone, financial institutions were fined roughly over 3 billion USD for failures to comply with anti-money laundering and terrorist finance requirements.
AML Compliance in Estonia
The financial sector, especially in Estonia, is an area where regulatory changes are being made at quite a fast pace due to innovations like virtual currencies, new ways of financing businesses, and new ways of moving assets. Estonia has been exposing itself to a high level of money laundering risk for quite some time, and the government is trying to fix it.
In case you missed, we wrote about the national AML risk assessment report in our last post.
While the government is trying to minimize its risks of enabling criminal activity and being exploited, they are trying to make sure that entrepreneurs with honest intentions are still welcome to do business in Estonia. This fact marks the importance of AML compliance in Estonia, as acting late can have negative consequences on daily business.
A good example is the situation where the Estonian Financial Intelligence Unit nullified 1296 activity licences held by 705 different virtual currency service provider companies when critical changes were made to the Estonian Money Laundering and Terrorist Financing Prevention Act in 2020. Most businesses lost their operating licences as they were not able to comply with the new laws or were just not aware of it.
So far in 2021, there have and will be several changes that affect the interpretation of laws and regulations which is why every company that deals with financial assets must have a professional AML officer or an advisor that is in the loop on the local level and is aware of what is taking place globally.
Who is an AML Officer?
An AML officer serves a vital role within a business, company or institution that deals with financial assets and has the main responsibility of overseeing internal anti money laundering policies and processes to remain compliant to important regulations, laws, and policies. It is the AML officer’s job is to ensure that the organisation is not exposed to possible criminal risk and does not facilitate financial crime while abiding the law and doing it efficiently.
Internally, the AML officer’s focus is on processes like Know Your Client (KYC) and Client Due Diligence (CDD) that help to collect important information about clients that offer insights to their intentions and activities. Similar processes are also important for detection, monitoring, and reporting activities with a suspicion of money laundering to the authorities.
AML officers generally have very strong knowledge and experience of international and local regulatory guidelines and standards.
Responsibilities of an AML Officer in Estonia
- Help a company to develop, implement and revise an anti-money laundering policies and procedures.
- Report to the Estonian Financial Intelligence Unit (FIU) when suspicious activity regarding money laundering or terrorist financing has been detected.
- Keep and maintain records and analysis of suspicious transactions/activities where there is a risk of money laundering or terrorist financing.
- Report and provide statements on compliance with the law to the company’s management.
- Manage the company’s AML training program.
- Organize third-party audits.
- Manage the company’s risk management system.
Regulatory Compliance Associates AML Officer Service
RCA offers full AML and compliance service for Estonian businesses who wish to have the expertise needed to keep their operations running smoothly.
Our AML officer service includes an AML contact person and/or a local board member for your licenced company. The AML officer will execution of tasks described in the Estonian Money Laundering and Terrorist Financing Prevention Act and offer up to 4 hours of legal and compliance advice related to the Estonian AML legislation per month.
In case you are interested in using our AML officer service, please feel free to reach out to us!
5 Ways You Can Make Your Business More Compliant:
- Consult local AML experts
Reaching out to local experts in AML regulatory compliance is an increasing trend, as specific knowledge in that area is sought-after and often hard to find. This is because the regulations are becoming even more complex, and changes may happen quickly. Therefore, it is a good idea to partner with a consultant if your company lacks the in-house knowledge and resources to ensure your company’s compliance strategy is up to date with the latest developments.
- Put internal processes in place and follow them
Staying AML compliant without any clear-cut and documented processes is often one of the biggest problems that companies face. Not having clear procedures usually leads to cutting corners or performing processes unknowingly, which eventually leads to becoming non-compliant. This means clear KYC and CDD processes that are in accordance with the Estonian law must be put in place, and which you can follow every time. Doing this enables you to significantly lower your company’s exposure to risk and more easily identify suspicious new clients.
- Invest in technology
Equally important to having clear internal processes is the use of AML systems that support your compliance strategy. Nowadays, there are several state-of-the-art technologies like cognitive computing, graph analytics, machine leaning, cloud computing, etc., that can recognize patterns, help with documents, and give an alert when suspicious activity has been detected. Using the right technology in your AML regulatory compliance can and most often will make you more effective in lowering risks.
- Be prepared for an AML audit
Of course, the most important aspect in compliance is staying compliant to the regulations. However, many companies forget about another important aspect which is preparing to be audited by the authorities. Starting off with the mindset that your business might be audited in the future naturally puts you on the right path to being compliant, as you must follow all the procedures according to the AML law. Preparing for an audit ensures that the audit goes smooth and quick if it happens.
- Hire a knowledgeable local AML officer
A key step in staying AML compliant is to hire or outsource an AML officer that knows what he/she is doing and has relevant former experience. There might be the temptation to hire someone not very knowledgeable for less amount of money. However, once mistakes are made, your business may face devastating and expensive consequences.