Estonia’s Money Laundering Risk Score: A Look Behind the Headlines

A Low Risk Score, But is it Accurate?

Despite being rocked by a massive money laundering scandal involving EUR 200 billion in suspicious payments, Estonia’s Financial Action Task Force (FATF) risk score remains one of the lowest globally. But is this really a reflection of the country’s true ML/TF risk?

The Basel AML Index: What Does it Mean?

According to the Basel AML Index Public Edition, Estonia scored just 2.68 out of 10 in 2019, making it one of the top performers since 2012. But what does this score really mean? The index is calculated from available data and methodology, not subjective opinions or assessments.

Factors Driving Estonia’s Low Risk Score

Estonia’s low risk score is largely driven by its good performance in its 2014 FATF Mutual Evaluation Report by Moneyval, which praised the country’s supervisory framework as “broadly sound”. However, this report also highlighted systemic concerns about the quality of supervision and effectiveness of public-private efforts related to AML/CTFT.

The FATF Risk Score: Is it Enough?

The FATF has not scheduled an onsite mission to Estonia for at least three years, meaning its risk score in the Basel AML Index is unlikely to change drastically. But what does this mean for the country’s true ML/TF risk?

Expert Opinion: One-Off Scandals Shouldn’t Define Risk

One expert argues that a one-off media report or scandal should not be taken into account in the Basel AML Index. “Time lags between real cases and detection, no regular updates, and countries cannot demonstrate progress” are just a few reasons why case-based data is not included.

Other Factors to Consider

So what other factors should be considered when assessing ML/TF risk? Estonia’s geographic proximity to Russia, for one, may pose issues associated with money laundering. And trade-based money laundering is another factor that has been identified by the FATF as a key method of disguising the origins of criminal funds.

Conclusion: Don’t Be Misled by Low Risk Scores

While Estonia’s low risk score may be reassuring, it is crucial to consider other factors that may not be reflected in the index. As one expert warns, “we can expect more money laundering schemes to be uncovered in the next years… Countries that respond to these positive trends and demands by increasing their levels of transparency and supervision may see a short-term increase in the uncovering of money laundering schemes.”

Key Takeaways:

• Estonia’s low risk score is driven by its good performance in the 2014 FATF Mutual Evaluation Report
• The Basel AML Index does not account for one-off scandals or case-based data
• Geographic proximity to Russia and trade-based money laundering are important factors to consider when assessing ML/TF risk
• Low risk scores should not be taken at face value; other factors may indicate a higher level of risk.