After the amendments to the Money Laundering and Terrorist Financing Prevention Act took effect on 15 March 2022, the validity of 389 authorisations has expired, either based on the decision of the Financial Intelligence Unit or at the request of the service providers. As of 1 May 2023, there were 100 active authorisations in Estonia for the provision of virtual asset services.
Following the entry into force of the enhanced requirements in the Money Laundering and Terrorist Financing Prevention Act, service providers abandoned nearly 200 authorizations. In addition, the Financial Intelligence Unit revoked almost the same number of authorisations due to non-compliance with the requirements.
“Given the documents submitted by the service providers that have lost their authorisations, and their methods of operation and the risks involved, it can be argued that the legislator’s response with regard to the amendments to the Act, and the supervision activities both before and after the amendments, have been relevant. In renewing authorisations, we saw situations that would surprise every supervisor,”
said Matis Mäeker, the Director of the Financial Intelligence Unit.
In the applications for the amendment of the authorisation, the Financial Intelligence Unit identified, among other things, persons appointed as members of the management board or as contact persons who were not aware of having been appointed, or whose curricula vitae were falsified or who did not have proper business reputation. The business plans submitted by several companies were identical and lacked any logic or connection with Estonia. In some cases, machine translation of inadequate quality was identified in the documents submitted. The applications of many companies were submitted to the Financial Intelligence Unit through the same providers of legal services or company services.
“In the applications, we found very many suspicious circumstances on various topics. This calls into question the credibility of the companies that wanted to do business here – their actual desire to provide services in Estonia or, vice versa, shows the desire of certain persons to use the Estonian economic and financial system for illegal activities,”
“We will continue reviewing the applications for amendment of authorisations, but soon, we can return to normality in terms of supervision, where we will be moving largely from assessment on paper to daily on-site supervision. Our colleagues from other countries have noticed our positive work and are now interested in learning about Estonia’s experience in identifying, assessing and managing risks in the virtual asset service providers sector,”
Matis Mäeker added.
In the summer of 2021, when Matis Mäeker assumed the position of the Director of the Financial Intelligence Unit, there were nearly 650 active authorisations of providers of virtual asset services in Estonia. The high risk of money laundering and terrorist financing in the sector was indicated by the National Risk Assessment, the analyses of the Estonian Financial Intelligence Unit and the evaluation by the international expert committee MONEYVAL. The Financial Intelligence Unit will continue reviewing authorisations and exercising continuous supervision in the field of money laundering and terrorist financing prevention, which is the only way to identify certain deficiencies.
Featured image credit: Edited from Freepik