Estonia revoked licenses from 189 crypto firms, while around 200 crypto-related companies left the country willingly. Estonia’s tightened Anti-Money Laundering (AML) laws led to the closure of nearly 400 virtual asset service providers (VASPs). This news was published through a release by the Financial Intelligence Unit (FIU) of Estonia. It mentioned that this was the result of the amendments in the Money Laundering and Terrorist Financing Prevention Act that came into effect in March 2022.
Further, it highlighted that 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. According to the authority as of 1 May 2023, there were 100 active authorisations in Estonia for the provision of virtual asset services.
The press release points out that following the entry into force of the enhanced requirements in the Money Laundering and Terrorist Financing Prevention Act, service providers abandoned nearly 200 authorisations. In addition, the Financial Intelligence Unit revoked almost the same number of authorisations due to non-compliance with the requirements. Further, the press release also mentioned various flaws in the appointment of the member of the management board; it highlights the use of false CVs. There were false business plans submitted by several companies. 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.
The Director of the Financial Intelligence Unit Matis Mäeker said “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 about 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,”
He further added “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.” Mäeker mentioned that the authority 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.
The Financial Intelligence Unit of Estonia has a multi-level role in the prevention of money laundering. Most of the work involves receiving, organizing and analyzing incoming information. The main outputs are the forwarding of identified cases to law enforcement and the recovery of illicit assets by imposing restrictions on the disposal thereof. The amount of risk associated with laundering proceeds of domestic crime remains several times lower compared to international crime. As per the annual report published by FIU, High-risk sectors include virtual assets and company service providers. Virtual asset service providers continue to be used in all sorts of criminal activities and laundering proceeds thereof. Company service providers have created an environment that helps hide the actual beneficiaries of companies.