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Estonia’s Financial Sector Faces Compliance Challenges

Tallinn, Estonia - A recent report has highlighted concerns over the effectiveness of Estonia’s financial sector in combating money laundering and terrorist financing (ML/TF).

Weaknesses in Risk Assessment, Control Systems, and Supervisory Practices

The report, published by a leading international organization, highlights weaknesses in risk assessment, control systems, and supervisory practices. According to the report, the Estonian Financial Intelligence Unit (EFIU) and the Financial Supervision Authority (EFSA) have faced challenges in implementing robust measures to prevent ML/TF.

Lack of Understanding of Risks

The sector has been criticized for lacking a deep understanding of risks, with many businesses failing to apply adequate preventive measures. The report noted that many businesses are not adequately disclosing beneficial ownership information, which hinders efforts to combat financial crime.

Supervision and Licensing Process

The report highlighted concerns over the effectiveness of supervision, with many businesses failing to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. The authorities’ reliance on remedial measures such as warnings and license withdrawals has been criticized for being ineffective in deterring non-compliance.

Transparency and Beneficial Ownership

The report identified issues related to transparency and beneficial ownership, including a lack of systematized analysis of ML/TF vulnerabilities and risk exposure.

International Cooperation

International cooperation has also been criticized for being hindered by limitations in extradition and mutual legal assistance agreements. While Estonia provides basic and beneficial ownership information to foreign authorities, issues related to dual criminality have hindered cooperation with non-EU jurisdictions.

Priority Actions

The report outlines a series of priority actions that Estonia must take to enhance its understanding of ML/TF risks, improve risk assessment, and strengthen control systems. These include:

• Providing uninterrupted coverage of considered periods in its nation-wide ML/TF risk assessments
• Disseminating relevant outcomes in a timely manner

Conclusion

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Estonia’s financial sector faces significant challenges in addressing these concerns, but the report’s findings also highlight opportunities for improvement. By implementing robust measures to prevent ML/TF, Estonia can strengthen its reputation as a trusted and secure jurisdiction for international business.