Importance of AML Compliance in Estonia | AML Officer

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.

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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.