Anti-Money Laundering (AML) in Estonia
In today’s business environment, anti-money laundering and measures associated with the concept have pretty much become the norm and almost everyone has heard something of it.
Ever since the Financial Action Task Force (FATF) was established in 1989 and recognized the threat that the banking system and financial institutions were facing, countries from all over the world, including Estonia, started gradually following the recommendations that the organization set throughout the years.
Considering the fact that Estonia became independent just 20 years ago and is now one of the pioneers in the fintech landscape by offering financial licenses for Virtual Asset Service Providers (VASPs), the local government is dealing with various threats while struggling to maintain stability and innovation in the local financial sector.
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Overview of AML in Estonia
In Estonia, the legislation related to Anti-Money Laundering and Counter-Terrorism Financing and the general policies of the financial sector are managed by the Estonian Ministry of Finance. The first Anti Money Laundering and Terrorist Financing Prevention Act in Estonia came into force in 2008, which set the course for tighter regulations for financial institutions and the sector in general.
Estonia is not a member of the FATF; however, the legislation is compliant with FATF standards and EU standards. Estonia is a member of MONEYVAL.
Financial sector supervisory authorities in Estonia
AML supervision in Estonia is carried out by the Estonian Financial Intelligence Unit (FIU) and Finantsinspektsioon (the Estonian Financial Supervision Authority). Both agencies are responsible for issuing licenses and supervision for certain areas of the local financial sector.
The FIU is an independent governmental authority in the governance area of the Ministry of Finance and carries out the analysis and verification of money laundering related suspicious transactions in Estonia.
The Estonian FIU is currently responsible for the supervision of companies that: operate as a trust and company service provider; provide pawnbroker services; provide virtual asset services; purchase or sell precious metals, articles of precious metals or precious stones.
Finantsinspektsioon has the responsibility to ensure stability, reliability and transparency of the financial sector in Estonia and oversees a bigger variety of obligated organizations than the FIU.
Finantsinspektsioon is responsible for the supervision of companies that: operate as a bank; operate as an insurance company; provide insurance intermediary services; provide fund manager services; operate with investment and pension funds; operate as a payment institution; operate as an e-money institution; operate as a creditor and/or a creditor intermediary; operate in the securities market.
General AML requirements for financial institutions in Estonia
As we brought out above, there are many different business types in Estonia that have the obligation to carry out AML activities throughout their organization. The anti-money laundering requirements already begin with a company’s management board as none of the board members can have a criminal record and a separate AML Compliance Officer must be appointed.
The AML Officer takes care of the business’ compliance with the AML laws and creates and manages the AML program where different CDD and KYC measures must be implemented. Another part of the AML program is a proper risk management system which helps to monitor and detect suspicious transactions that are happening withing or via the company. If such transactions are detected, the company has the obligation to prepare a respective report and send it to the FIU or Finantsinspektsioon.
Businesses that are not compliant with the AML legislation may end up getting fined due to their non-compliance and may end up even getting their financial licenses suspended or even taken away.
RCA can help you understand the Estonian AML legislation
In case you wish expert help to fully understand and how to be compliant with the Estonian AML legislation, please feel free to reach out to us and book a consultation. We can provide you with concrete steps that you can take to start being compliant today.
Disclaimer: This article provides general information, which may or may not be correct, complete or current at the time of reading. No recipients of content from this site should act on the basis of content of the article without seeking appropriate legal advice or other professional counseling.