Estonia’s Anti-Money Laundering Efforts Criticized

Limited Sanctioning Powers Complicate Combating Money Laundering and Terrorist Financing

A recent assessment has revealed that Estonia’s powers to sanction unlicensed activity and impose financial sanctions are limited, making it challenging for the country to effectively combat money laundering (ML) and terrorist financing (TF). The report highlights several issues hindering Estonia’s ability to prevent and detect ML/TF activities.

Insufficient Understanding of Money Laundering and Terrorist Financing Risks

The assessment found that while authorities have taken steps towards identifying and assessing ML/TF vulnerabilities, their understanding of these risks is still insufficient. Additionally, the country lacks adequate, accurate, and current beneficial ownership information (BOI), which hinders its ability to prevent misuse by legal persons.

Challenges in Cooperating with Other Jurisdictions

Estonia has reserved the right to refuse assistance in ML/TF investigations due to the principle of dual criminality, which can hinder cooperation with non-EU jurisdictions. Although some requests have been sent regarding seizing assets in foreign jurisdictions, no information is available on confiscating assets moved abroad.

Money Laundering Threats and Banking Sector Efforts

The report highlights that Estonia faces money laundering threats from proceeds of crime primarily committed abroad and less frequently domestically. The country’s banking sector has shown positive dynamics towards reinforcing its anti-money laundering (AML) measures, but the practical application of these measures remains to be improved.

Commendations and Areas for Improvement

Estonia was commended for its efforts towards developing an effective AML/CFT system, including strengthening supervisory efforts and focusing on virtual asset service providers (VASPs). However, several issues remain, including:

• Implementation of UN TFS
• Regulation of VASPs
• National risk assessments and action plans

Recommendations for Improvement

The assessment recommends that Estonia’s national risk assessments and action plans should be significantly improved to provide uninterrupted coverage of considered periods and timely endorsement of assessment outcomes. The country’s authorities were urged to integrate the outcomes of nationwide risk assessment exercises into their objectives and activities.

Conclusion

Estonia’s AML/CFT system is supported by regular work of intergovernmental committees and adequate bilateral arrangements, but the country’s lack of progress in addressing these issues raises concerns about its ability to effectively combat ML/TF.