Estonia’s latest effort to flush out white-collar criminals is due Tuesday, when Tallinn’s amendments to its Money Laundering and Terrorist Financing Prevention Act come into force — with the international community watching closely. And more initiatives are coming down the pipeline.
Estonia’s banking sector has already humiliated the government on multiple occasions by funneling billions in suspicious funds for clients based in Russia. There’s no way that’ll happen again through crypto, as far as the country’s treasury and financial intelligence unit are concerned.
"We do welcome the innovation, but for us, it's very clear that we will not and cannot tolerate any financial crime, and preventing money laundering is certainly a political priority," Estonia’s finance minister, Keit Pentus-Rosimannus, told POLITICO.
The new rules shore up a licensing process that most in Estonia’s crypto market agree was far too loose. The first licensing regime that emerged in 2017 made it easy for hundreds of companies to get an Estonian license and operate from anywhere in the world. Some firms even made a business out of selling shell companies.
“Supervision was simply not possible,” the minister said. “But the risk was ours because they operated with an Estonian license. That was one thing that was changed with the law.”
Tallinn’s decision to tighten its supervisory leash now comes as little surprise to the industry, which is launching efforts more broadly to stop bad actors and trying to dispel concerns that Russia and Belarus are using crypto to dodge Western sanctions on grounds.
The government is under pressure to perform as the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) is halfway through a two-year audit on the country’s dirty money safeguards. The routine audit, which concludes this December, is also looking at how digital assets are regulated. A group of auditors is arriving in Tallinn on April 25 for a two-week visit.
Estonia could face heavy consequences if it falls short of MONEYVAL's expectations. Offending nations can ultimately end up on the world’s dirty money gray list, which includes Malta. The resulting stigma has a track record of scaring foreign investors away from an offending country.
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