Estonia’s Financial Sector Needs Strengthened Supervision to Combat Money Laundering

Concerns Over Effectiveness of Supervision

A new report has highlighted concerns over the effectiveness of Estonia’s supervision of its financial sector in combating money laundering and terrorist financing. The report, which assessed the country’s efforts to prevent these crimes, found that many financial institutions have inadequate risk assessments and control systems in place.

Criticisms of Financial Intelligence Unit (EFIU)

The EFIU was criticized for not conducting thorough risk assessments and not taking a risk-sensitive approach to supervision. This has led to concerns over the effectiveness of the agency’s ability to identify and address money laundering and terrorist financing risks.

Lack of Transparency and Accountability

The report also noted that many financial institutions have failed to implement adequate anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, despite being required to do so by law. This has led to a lack of transparency and accountability in the sector.

Failure to Provide Adequate Beneficial Ownership Information

The Estonian authorities were also criticized for not providing adequate information on beneficial ownership (BO), which is critical in identifying and preventing money laundering and terrorist financing.

Recommendations for Improvement

To address these concerns, the report made several recommendations, including:

• Enhancing the understanding of ML/TF risk faced by the country through improved nation-wide ML/TF risk assessments
• Improving the effectiveness of AML/CFT measures in financial institutions
• Increasing transparency and accountability in the sector
• Providing adequate information on beneficial ownership

Key Takeaways

Estonia’s financial institutions have inadequate risk assessments and control systems in place. The EFIU has not conducted thorough risk assessments and does not take a risk-sensitive approach to supervision. Many financial institutions have failed to implement adequate AML/CFT measures. Transparency and accountability are lacking in the sector. Beneficial ownership information is not adequately provided.

Recommendations

• Enhance understanding of ML/TF risk faced by the country through improved nation-wide ML/TF risk assessments
• Improve effectiveness of AML/CFT measures in financial institutions
• Increase transparency and accountability in the sector
• Provide adequate information on beneficial ownership