Estonian Parliament Passes Sweeping Reforms to Combat Financial Sanctions

In an effort to strengthen its anti-money laundering and counter-terrorism financing regime, the Estonian parliament has approved new laws aimed at mitigating risks associated with financial sanctions.

Strengthening Risk Management Frameworks

Under the new regulations, individuals and entities with special obligations – including credit and financial institutions, notaries, lawyers, enforcement agents, interim trustees in bankruptcy, and other legal service providers – will be required to establish a robust risk management framework to identify, assess, and mitigate potential breaches of international sanctions.

Key Components of the Framework

The framework includes:

• Risk Assessment: Individuals and entities with special obligations must determine their risk appetite and conduct regular risk assessments to identify potential threats.
• Rules of Procedure: They must establish written rules of procedure that outline the steps to be taken in case of suspicion or identification of a subject of financial sanctions, as well as instructions on how to apply due diligence measures.
• Internal Control: Internal control rules must be established to verify compliance with the rules of procedure and ensure the proper storage of data.

Additional Requirements

The new laws also require individuals and entities with special obligations to:

• Apply Due Diligence Measures: They must apply due diligence measures on a regular basis to identify potential breaches of financial sanctions.
• Notify Authorities: In case of suspicion or identification of a subject of financial sanctions, they must notify the authorities immediately.

Enhanced Requirements for Legal Service Providers

Legal service providers are now required to assess the legal situation of their clients and report any suspicious transactions to the authorities.

New Requirements for Registrars

The Estonian government has also established new requirements for registrars, such as those responsible for registering European patents, utility models, trademarks, and other intellectual property rights. These registrars must now conduct regular checks to ensure that financial sanctions are not being breached.

Training for Employees

To ensure effective implementation of these reforms, individuals with special obligations must provide training for employees whose duties include establishing business relationships or making transactions. The training must cover topics such as risk assessment, international sanctions, and personal data protection requirements.

Effective Date

The new laws come into effect on March 15, 2022, and are expected to have a significant impact on Estonia’s financial sector.