Estonia Enacts Money Laundering Prevention Act to Protect Financial System

On September 1, 2018, the Estonian government took a significant step in preventing money laundering and terrorist financing by enacting the Money Laundering and Terrorist Financing Prevention Act.

Key Provisions of the Act

• Due Diligence Measures: Notaries are now required to conduct due diligence measures to identify the beneficial owner of foreign legal entities, particularly those not registered in Estonia’s Commercial Register. This is a crucial step in preventing money laundering and terrorist financing activities.
• Risk Assessment: Notaries must assess the degree of risk associated with customers and transactions. This involves gathering additional information on funding sources and property, as well as obtaining written consent from the Financial Intelligence Unit (FIU) or refusing to perform certain transactions if deemed necessary.

Requirements for Notaries

• Questionnaires: Notaries will be required to fill out questionnaires to collect data on:
  • Beneficial owners
  • Foreign politically exposed persons
  • Transaction financing sources
  • Customer professions or fields of activity
• Data Retention: These questionnaires must be retained alongside transaction documents and submitted to the FIU when necessary.

Classification of Risk

According to the Estonian Chamber of Notaries’ rules of procedure, the degree of risk is classified into three categories:

• Lower than usual
• Average
• Higher than usual

This classification will determine the level of due diligence measures applied by notaries.

Goals and Impact

The Estonian government emphasized that the new act aims to strengthen the country’s financial system and ensure compliance with international standards on anti-money laundering and counter-terrorism financing. The implementation of this act is expected to have a positive impact on Estonia’s reputation as a transparent and secure jurisdiction for international business transactions.