Financial Crime World

Title: Estonia Faces Increasing Money Laundering Risks: A Look at the Definition, Prevalence, and Countermeasures

Definition of Money Laundering According to Estonian Law

  • Money laundering is the conversion or transfer of proceeds derived from criminal activity for the purpose of concealing or disguising their illicit origin. (§ 4 of the Money Laundering and Terrorist Financing Prevention Act)
  • Includes various activities such as acquisition, possession, or use of property derived from criminal activities.

Prevalence of Money Laundering in Estonia

According to the 2018 National Risk Assessment report, during the 2017-2019 period:

  • 32 money laundering cases were recorded, leading to 77 individuals being convicted.
  • Three legal persons were also convicted.

Despite these figures, the scope of money laundering may be underestimated since:

  • Many predicate offenses are perpetrated outside Estonia.
  • Perpetrators are often not identified.

Common Forms of Predicate Offenses

  1. Computer fraud: Unauthorized use of computer systems for financial gain.
  2. Fraud: Deception to obtain financial gain or cause a loss.
  1. Tax fraud: False information in tax returns to reduce VAT liability.
  2. Fraud related to small loan companies: Unpaid loans and fraudulent lending practices.

International Cooperation

With many predicate offenses originating from other countries, international cooperation is essential in combating money laundering.

Countermeasures to Money Laundering in Estonia

Regulations for Virtual Currency Service Providers

Enhanced Due Diligence Procedures for Financial Institutions

Notable Money Laundering Schemes in Estonia (2017-2019) Reported by the Estonian Financial Intelligence Unit (FIU)

  1. Cyber fraud and Investment Fraud

    • Increased volume and worldwide nature of cybercrime requires constant monitoring and vigilance.
    • Loans taken without intent to repay.

  3. Perpetration of tax fraud

    • False information in tax returns to reduce VAT liability, leading to the detection of illegal acquisition of proceeds.

  4. Withdrawal of money with falsified bank cards

    • Money transferred to falsified bank cards obtained through stolen bank card data.
    • Money laundering can be observed during the layering phase of these transactions.

Money laundering poses a significant threat to Estonia’s financial system and economy and requires continuous efforts to identify and report suspicious transactions to law enforcement.