Estonia, Financial Services, Legislation

The advisory guidelines apply to all credit and financial institutions operating in Estonia which are subject to supervision by the Estonian Financial Supervision Authority. The authority will also clarify the supervision procedure for preventing money laundering and terrorist financing, the agency said.

The Estonian financial watchdog added that the guidelines provide financial intermediaries with a new and clearer framework and help detect risks, analyze their nature and the dangers they pose and immediately mitigate them to ensure that the Estonian financial sector will not be used for money laundering and terrorist financing.

The guidelines also elucidate the content and fulfillment of the requirements stated in the Money Laundering and Terrorist Financing Prevention Act, which entered into force in November 2017, and give market participants directions in establishing a functioning solution for their organization to ensure it complies with the law.

The Financial Authority calls for market participants to demonstrate enhanced due diligence in providing services to high risk and non-resident customers.

"A service which is provided from a distance requires appropriate controls enabling to fully understand the business of the customer and its ultimate beneficiaries," member of the board of the Financial Supervision Authority Andre Nomm said, adding that lack of such controls and systems means that the institution must cease providing said services. 

Cryptocurrencies as well as the related services and trading platforms are a new source of risk, the authority said. With these services, financial intermediaries have the obligation to ensure the required qualifications for using means of preventing money laundering and terrorist financing, and additionally, for comprehending the technical particularities of these services and the risks posed by them, the regulator said.

The new guidelines enter into force on March 1, 2019. Until then, a three-month transitional period is provided, so that the institutions subject to supervision can adapt to the new guidelines and change their internal procedures.