The financial supervision authority is in favour of increasing sentences for money laundering and terrorist financing
On 26 October, the Riigikogu passed the new Money Laundering and Terrorist Financing Prevention Act with 74 votes, one clause of which raised the upper limit on fines for legal entities committing financial offences from 32,000 euros to 400,000 euros. The Financial Supervision Authority welcomes the change, though it supports continuing harmonisation of punishments with the Fourth Anti-Money Laundering Directive, which sets a maximum fine rate of at least five million euros.
The revised Money Laundering and Terrorist Financing Prevention Act transposes into Estonian law the Directive (EU) 2015/849 of the European Parliament and of the Council, known as the Fourth Anti-Money Laundering Directive, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
The main change is that legislators have made clearer the content and scope of the due diligence measures to be applied when creating and monitoring business relations with clients, and the requirement for ensuring transparency of the actual beneficiaries of companies. Legislators have also increased the liability of companies for various breaches of the Money Laundering and Terrorist Financing Prevention Act.
Applying the due diligence measures means companies must now identify local people with a state background and in certain cases take additional measures concerning them.
Ensuring the transparency of the actual beneficiaries of companies means significant changes to the content of regulation of actual beneficiaries. Identification of actual beneficiaries earlier applied only to people liable for money laundering and terrorist financing prevention, where it was only one aspect of the background research on clients, but the new law requires all legal entities to declare their actual beneficiaries and publish information on them.
Legislators have also raised the maximum financial penalty for legal entities from 32,000 euros previously to 400,000 euros when the new law comes into force. The reason for this is that the penalties in the current Money Laundering and Terrorism Financing Prevention Act do not reflect the importance of the legal interests being defended or discourage criminal activity.
The Financial Supervision Authority equally supports continuing harmonisation of penalties with the Fourth Anti-Money Laundering Directive, which sets the maximum penalty for legal entities at five million euros at least, or 10% of total turnover for the year, and for private individuals at five million euros at least.
“The Financial Supervision Authority believes that such rates would provide better deterrents to prevent the financial system and the economic space of Estonia being used for money laundering and terrorist financing”, said Andre Nõmm, a member of the management board of the Financial Supervision Authority.
Preventing money laundering and terrorist financing is one of the strategic goals of the Financial Supervision Authority.