Financial Crime World

Estonia’s Efforts in Fraud Detection and Prevention in Finance Yield Positive Results

Tallinn, Estonia - Estonia’s economy has been recognized as one of the most developed in the world, with a strong financial environment that has attracted international attention. In its efforts to maintain this stability, the Estonian government has been working diligently to combat fraud, particularly money laundering.

Lowest Risk of Money Laundering

According to the Basel AML Index Data released in 2019, Estonia had the lowest risk of money laundering among 125 countries, earning widespread praise globally. The country’s commitment to anti-money laundering (AML) laws and regulations is a key factor in maintaining its economic stability and preventing threats from outside.

Implementation of AML Laws and Regulations

Since gaining independence in 1991, Estonia has implemented AML-specific laws and regulations over several years. Following its admission into the European Union in 2004, the government worked to ensure effective international collaboration. In 2007, the country integrated the First EU Money Laundering Directive into its legislation, with subsequent amendments solidifying Estonia’s AML framework.

Robust Framework for AML Compliance

The Money Laundering and Terrorist Financing Prevention Act of 2008 established a robust framework for AML compliance, requiring banks, financial services providers, gambling organizers, and real estate agents to comply. Nearly a decade later, the law was amended twice to better align with international collaboration in the AML framework, successfully implementing the Fourth and Fifth EU Money Laundering Directives.

Strengthening Efforts

Despite these efforts, Estonia faced several threats, including a money laundering scandal involving the Estonian branch of Danske Bank between 2017-2018. Since then, the country has strengthened its efforts to prevent fraud.

Key Players in AML Compliance

  • The Estonian Financial Intelligence Unit (FIU) is responsible for analyzing and verifying transactions suspected of money laundering and terrorist financing.
  • Finantsinspektsioon (Estonian Financial Supervision and Resolution Authority) oversees obligated organizations.
  • A government committee has also been established to combat money laundering and terrorist financing.

Responsibilities under AML Obligations

Organizations under AML obligations in Estonia have certain responsibilities, including:

  • Having an AML compliance officer
  • Conducting customer due diligence
  • Applying enhanced due diligence to high-risk customers

Failure to comply can result in penalties, including fines or imprisonment.

Recent Progress and Future Plans

In recent years, Estonia has made significant progress in combating money laundering and terrorist financing. The country was found compliant for 7 and largely compliant for 18 of the Financial Action Task Force (FATF) 40 Recommendations during its latest Mutual Evaluation in 2022.

To further enhance AML compliance, Estonian companies can look to Sanction Scanner’s exclusive partnership in the fight against fraud. By leveraging premier AML software solutions, organizations can ensure compliance with anti-money laundering laws and regulations while propelling their business practices to unprecedented levels.