Financial Crime World

Estonia’s Regulatory Bodies Crack Down on Financial Crime

Estonia has established itself as a country with a developed economy and strong financial environment, according to the International Monetary Fund (IMF). To maintain this stability and prevent threats from outside, the Estonian government has been continuously developing measures against fraud, particularly money laundering. As part of its efforts, Estonia has implemented various anti-money laundering (AML) laws and regulations.

AML Framework Evolution

The country’s AML framework has undergone significant changes since gaining independence in 1991. With its admission into the European Union (EU) in 2004, Estonia worked to ensure effective international collaboration. In 2007, it integrated the First EU Money Laundering Directive into its legislation, followed by several amendments to solidify its AML framework.

  • The Money Laundering and Terrorist Financing Prevention Act was enacted in 2008, obliging banks, financial services, gambling organizers, and real estate agents to comply with AML regulations.
  • The law has been amended twice since then to better align with international collaboration in the AML framework.

Challenges and Efforts

Despite these efforts, Estonia still faced threats from financial crime. In 2017-2018, the Estonian branch of Danske Bank was involved in a money laundering scandal. Since then, Estonia has strengthened its efforts to prevent fraud in the country.

  • In 2022, Estonia’s Mutual Evaluation by the Financial Action Task Force (FATF) found the country to be largely compliant with 18 out of 40 FATF recommendations and fully compliant with seven others.

Regulatory Authorities

Estonia’s regulatory authorities play a crucial role in combating financial crime. The Ministry of Finance is responsible for general policies and activities to prevent money laundering, while the Estonian Financial Intelligence Unit (FIU) analyzes and verifies transactions suspected of money laundering and terrorist financing.

  • Obligated organizations must report suspicious transactions to the FIU.
  • Finantsinspektsioon (Estonian Financial Supervision and Resolution Authority) oversees obligated organizations, and a government committee has been established to combat money laundering and terrorist financing.

Responsibilities and Penalties

Organizations subject to AML obligations in Estonia have specific responsibilities, including:

  • Appointing an AML compliance officer
  • Conducting customer due diligence
  • Applying enhanced due diligence to high-risk customers
  • Keeping customer information for at least five years
  • Reporting suspicious activities to the authorities

Failure to comply with AML requirements can result in penalties, including imprisonment or fines. For example:

  • The conclusion of an agreement for the purpose of money laundering is punishable by up to one year’s imprisonment or fines between €4,000 and €40,000.

Partnership against Financial Crime

In its fight against financial crime, Estonia can look to Sanction Scanner’s exclusive partnership with premier AML software solutions. By partnering with Sanction Scanner, Estonian companies can ensure compliance with anti-money laundering laws and regulations, guaranteeing secure and efficient financial operations.

Contact Sanction Scanner today to learn more about how you can join the fight against fraud in Estonia.