Baltic, Banks, Estonia, Financial Services

"Last year can boldly be labeled as the year that the importance of hindering money laundering stepped onto the stage. The withdrawal of the activity license of Versobank on the basis of an application submitted by the Financial Supervision Authority in 2018 due to a serious breach of the norms of hindering money laundering was a precedent that brought on a change of paradigm in the whole of Europe," Kessler said in a presentation made to the Riigikogu regarding the FSA's activity last year.

"It appeared that many European banks were linked with risky non-resident business in ways in which their control systems were not able to identify or manage the risks. The Financial Supervision Authority was one of the first to start tidying up the field already in 2014," the head of the FSA said.

Kessler said that even though this is not the primary task of financial supervision by law, the FSA will continue to treat hindering money laundering and the financing of terrorism in the financial sector very seriously in the future as well. At that, the watchdog will continue deepening both domestic as well as international cooperation.

One example of the new dimensions of international cooperation is the theoretical regional financial crisis prepared by the FSAs and crisis management institutions of the Baltic and Scandinavian countries and the European Union at the end of last year and rehearsed at the beginning of this year. "Similarly to the defense forces, the financial supervision authorities also hold the good practice of testing their capabilities every once in a while. The results of the exercise have by now been analyzed, the bottlenecks filtered and the participants have been given feedback. Estonian institutions that participated in the exercise did their jobs well," Kessler said.

The head of the FSA also drew the MPs' attention to the insufficiency of monetary fines in the financial sector. "Since 2004 already, we have consistently pointed out to partners that the monetary penalties in the financial sector are not effective. While they have risen from 3,200 euros to 32,000 euros and in some cases even up to 400,000 euros over time, these figures are not discouraging enough when it comes namely to large professional financial mediators," he said.

According to Kessler, the fines should be high enough that excessive risk-taking and violation of law is not worth it. In addition, it must be possible to use fines to demand compensation for the violation of public good.