Financial Crime World

Estonia’s Financial Crime Laws and Regulations: A Strong Framework Against Fraud

Estonia, hailed by the International Monetary Fund (IMF) as one of the countries with a developed economy and strong financial environment, has been actively developing measures to combat fraud, particularly money laundering. The country recognizes the importance of anti-money laundering (AML) laws and regulations in maintaining its stable economy and preventing threats from outside.

AML Framework: Evolution and Strength

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 implementation of specific AML laws and regulations has been a long-standing process in Estonia, dating back to its independence in 1991.

  • With its accession to the European Union (EU) in 2004, the Estonian government worked diligently to ensure effective international collaboration.
  • In 2007, plans were made to integrate the First EU Money Laundering Directive into Estonian legislation, followed by several amendments to solidify Estonia’s AML framework and align it with EU legislation and Financial Action Task Force (FATF) recommendations.

Enforcement and Compliance

The Money Laundering and Terrorist Financing Prevention Act was enacted in 2008, imposing obligations on:

  • Banks
  • Financial services
  • Gambling organizers
  • Real estate agents

Despite these efforts, Estonia has faced challenges in maintaining its AML compliance. In 2017-2018, the Estonian branch of Danske Bank, Denmark’s largest financial institution, was involved in a money laundering scandal.

However, since then, Estonia has strengthened its efforts to prevent fraud.

Recent Progress and Achievements

In recent years, Estonia has made significant progress in combating financial crimes. During its latest Mutual Evaluation by the FATF in 2022, Estonia was found:

  • Compliant with seven of the 40 Recommendations
  • Largely compliant with 18 of the 40 Recommendations

Key Players and Responsibilities

The Estonian Ministry of Finance is responsible for general policies and activities to prevent money laundering. The Estonian Financial Intelligence Unit (FIU) analyzes and verifies transactions suspected of money laundering and terrorist financing.

  • Organizations with AML obligations must report suspicious transactions to the FIU.
  • Finantsinspektsioon (Estonian Financial Supervision and Resolution Authority) is responsible for overseeing obligated organizations in Estonia.
  • A government committee has been established to combat money laundering and terrorist financing.

Obligations and Responsibilities

Organizations under the anti-money laundering obligations in Estonia have specific responsibilities, including:

  • Having an AML compliance officer
  • Applying Customer Due Diligence and Enhanced Due Diligence to customers
  • Using Politically Exposed Persons lists
  • Keeping customer information for at least five years

Failure to comply with these requirements can result in penalties.

Criminal Offenses and Penalties

Criminal offenses of money laundering and terrorist financing are punishable by:

  • Imprisonment or fines in Estonia
  • Penalties varying according to the amount and prevalence of the criminal act

Staying Ahead: Exclusive AML Software Solutions

For Estonian companies looking to stay ahead in the fight against fraud, Sanction Scanner offers exclusive AML software solutions that guarantee compliance with anti-money laundering laws and regulations. Contact us today to learn more about our premier solutions and how you can join forces to create a future of secure and efficient financial operations.