Experts of the International Monetary Fund (IMF) provided a positive assessment of the anti-money laundering activities of Estonia's Financial Supervision Authority (FSA).
Money laundering risks in Estonia have decreased significantly in the last five years, and banking sector cases being addressed publicly date back to the past, the FSA said. While non-resident deposits in the Estonian banking sector accounted for 19 percent of all deposits in 2014, this total dropped to 10 percent as of the end of 2019, while non-resident structure has become significantly less risky.
"The IMF's high assessment regarding the FSA's activity in connection with preventing money laundering indicates that our team has done a proper and efficient job," FSA director Kilvar Kessler said in a press release. "We will take specialists' professional recommendations fully into consideration in order to organize our work even better."
According to the IMF, the FSA was an early adopted of the principles of risk-based supervision, developing the tools and procedures for a risk-based approach to supervision, such as an offsite monitoring tool, institutional risk profiles, and focusing attention on financial institutions it considers a higher money laundering and terrorist financing (ML/TF) risk. The IMF's experts noted that the FSA actively uses the tools available to promote and enforce compliance with financial institutions' anti-money laundering and counter-financing of terrorism (AML/CFT) related obligations.
The FSA conducted 29 on-site inspections from 2014-2018, including seven on-site inspections of banks over the last three years. The FSA has submitted 84 off-site monitoring inquiries to its supervised entities over the last four years. However, according to the IMF, full-scope inspections are so resource-intensive that, at current staffing levels, they essentially limit the number of financial institutions that may be inspected to a maximum of five per year.
The IMF said that, given the FSA's current approach, the increased coverage of financial institutions could, in principle, be achieved in two ways — via a substantial increase in the AML/CFT division's staff and/or the development of risk-based targeted and thematic inspections. The latter would allow the FSA to conduct shorter, more focused inspections targeting those aspects that pose elevated risks within an individual financial institution, such as particular customers, transactions, services or compliance gaps, or else categories of, for example, customers, transactions or services that pose elevated risks to the entire sector.
The FSA is responsible for the stability and soundness of the financial sector in its financial supervision. This means assessing the compliance of banks' capital, management and organization and risk controls with financial market regulations, business models and risks. The prevention of money laundering is not the primary focus of the FSA, but has been one of the FSA's strategic priorities since 2014.
The Financial Intelligence Unit collects and analyzes information suggesting money laundering as well as traces criminal proceeds. Specific suspicions of crime are investigated by the Prosecutor's Office and the police. An important safeguard against money laundering is market participants via their well-designed and functioning organizations and compliance with the law.
Editor: Aili Vahtla