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Estonian Financial Supervision and Resolution Authority Steps Up Efforts to Combat Money Laundering and Terrorism Financing

The Estonian financial sector is subject to strict regulations aimed at preventing money laundering and terrorism financing. As a key player in the country’s financial supervision, Finantsinspektsioon works tirelessly to ensure that banks, insurance companies, intermediaries, investment firms, fund managers, investment and pension funds, payment institutions, creditors, credit intermediaries, and securities market participants operate within the bounds of the law.

Oversight Duties

Under its oversight duties, Finantsinspektsioon conducts regular checks on financial intermediaries to verify compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. The authority’s primary goal is to ensure that these organizations adopt procedures and systems in line with their business plan, risk assessment, and staffing levels.

Reporting and Supervision

In the event of suspected money laundering or terrorism financing, Finantsinspektsioon reports its findings to the Estonian Financial Intelligence Unit (FIU). The authority’s supervision efforts are divided between capital supervision and market and service supervision, aimed at upholding the reliability of the Estonian financial system by guaranteeing the stability and quality of services provided by businesses offering financial services.

Obliged Entities

For obliged entities operating in Estonia, compliance with AML/CTF regulations is crucial. To achieve this, entities must:

• Conduct a risk assessment that considers four key categories:
  • Risks involving clients, nations, regions, or jurisdictions
  • Risks associated with transactions, services, or goods
  • Risks related to interactions, transactions, products, services, or delivery methods between the entity and its customers
• Establish procedural guidelines for efficient risk reduction and management regarding money laundering and terrorism financing
• Work collaboratively with other required parties, state supervisory agencies, and law enforcement to combat these illicit activities

Due Diligence Procedures

Obliged entities must apply due diligence procedures when:

• Initiating a business connection or participating in transactions involving cash payments exceeding 15,000 euros or an equivalent amount in another currency
• Maintaining guidelines for reviewing commercial partnerships and including transaction descriptions along with dates or periods

Reporting Obligations

Obliged entities are required to notify the FIU within two working days if they identify any actions or circumstances that could indicate money laundering or terrorism financing. This notification must be submitted promptly, regardless of whether the entity has reason to believe the behavior has already taken place.

Additionally, obliged entities must inform the FIU of any transaction involving cash payments exceeding 32,000 euros, regardless of whether the payment is made in a single transaction or through multiple connected transactions. This notification must also be submitted within two working days of the transaction’s execution.

Conclusion

By adhering to these regulations and reporting obligations, Estonia’s financial sector can ensure its integrity and prevent the misuse of funds for illegal activities. Finantsinspektsioon’s efforts to combat money laundering and terrorism financing are crucial in maintaining a stable and reliable financial system that benefits both individuals and businesses operating within the country.