Prevention of money laundering in Estonia
Competent authorities in Estonia
In Estonia, the following institutions and entities are engaged in the prevention of money laundering and terrorist financing, each within the limits of their competence provided by law:
- Financial Intelligence Unit (FIU)
- Investigative authorities (Police and Border Guard Board, Internal Security Service (KAPO), Estonian Tax and Customs Board);
- Office of the Prosecutor General and Estonian courts
- Finantsinspektsioon and other supervisory authorities such as Notarite Koda and Estonian Bar Association
- Credit and financial institutions and other obligated persons within the meaning of the Estonian Money Laundering and Terrorist Financing Prevention Act
- Ministry of Finance and Ministry of Interior
The Financial Intelligence Unit has primary responsibility for monitoring money laundering and it collects information and observes income from criminal activities. The unit has the right to receive information from Finantsinspektsioon and other state and local government institutions, and under an injunction from individuals, on activities, transactions and people suspected of involvement in money laundering or terrorist financing.
The overall responsibility for the legislative background and coordination of the prevention of money laundering and terrorist financing lies with the Ministry of Finance.
Government Commission for the prevention of money laundering
The Government Commission for the coordination of the prevention of money laundering and terrorist financing was established by Government Order No. 285 of 11 May 2006. The members of the Commission are representatives of public sector institutions and other institutions involved in the fight against money laundering. The Commission was established to set up a national coordination system, as finding an effective solution to the problems in this area requires constant cooperation between the authorities and individuals involved. The Commission consists of representatives of several ministries, the Tax and Customs Board, the Prosecutor's Office, police authorities, Eesti Pank and the Finantsinspektsioon. The Commission shall meet as necessary, but not less frequently than once every four months.
The role and competence of the Finantsinspektsioon
As the financial supervisory authority, Finantsinspektsioon is involved in preventing money laundering primarily through its monitoring of financial intermediaries as part of its supervisory work. It is responsible for ensuring that the organisation and risk management of banks and other financial intermediaries employ processes and systems that match the business strategy and risks, and that those systems are sufficiently staffed. This covers credit issuance, provision of payment services and investment services, insurance risks, and the organisation of financial intermediaries more broadly. The know-your-client principle is a part of risk management, and adherence to this principle is in itself a way of countering money laundering.
The role of financial supervision is to monitor the processes and systems of those under supervision, not to establish whether money laundering has occurred in specific cases. If evidence of money laundering or terrorist financing is uncovered by Finantsinspektsioon during supervision, then this is passed on to the Financial Intelligence Unit as required by law.
Prevention of money laundering internationally
In the field of prevention of money laundering, in addition to national co-operation, it is also important to represent Estonia's interests in international committees and working groups dealing with the implementation and evaluation of the effectiveness of anti-money laundering and anti-terrorist financing standards.
Internationally, the following institutions deal with the prevention of money laundering and terrorist financing:
- Financial Actions Task Force (FATF)
- European Banking Authority (EBA)
- European Central Bank
- Basel Commitee (BCBS)
The Financial Actions Task Force (FATF) is the inter-governmental body that sets international standards and methodologies that aim to prevent money laundering and terrorist financing. Based on the methodology developed by the FATF, the assessment of FATF countries and countries belonging to regional organizations (including MONEYVAL) is carried out.
Select Committee of Experts on the Evaluation of Anti Money Laundering Measures (MONEYVAL) is an expert committee of the European Council, which assesses measures taken against money laundering. MONEYVAL assesses the level of implementation of measures taken against money laundering in those Council of Europe member states that are not members of the FATF.
The European Banking Authority (EBA) is required to ensure the integrity, transparency and orderly functioning of financial markets. As part of this mandate, the EBA works to prevent the use of the financial system for the purposes of money laundering and terrorist financing (ML/TF).
The European Central Bank (ECB) is an official EU institution at the heart of the eurosystem and the Single Supervisory Mechanism. Finantsinspektsioon supervises the larger banks in Estonia together with the European Central Bank and supervises smaller credit institutions independently, but the main responsibility for supervision of branches operating in Estonia of banks from European Union member states that are not in the euro area lies with the supervisory authority of that country.
The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. Basel Committee provides guidelines to strengthen the interaction and cooperation between prudential and AML/CFT supervisors.