Banking Association agrees on stricter anti-money laundering measures

The Estonian Banking Association wants to crack down harder on money laundering in Estonia.
The Estonian Banking Association wants to crack down harder on money laundering in Estonia. Source: Reuters/Scanpix

The board of the Estonian Banking Association (EBA) on Tuesday approved anti-money laundering due diligence measures that will become mandatory for all member banks. The EBA likewise presented to all political parties elected to the XIV Riigikogu its recommendations for further improving the fight against money laundering with the help of legislation.

"The serving of non-residents and the movement of money from the east to Estonia, other countries in the region and other EU member states has been a part of post-reindependence banking," said EBA board chairman Erki Kilu. "We are doing, and we previously did, our best according to valid rules to ensure that Estonian banking infrastructure would not be used to malicious ends. Unfortunately, we have to admit that based on our current rules and perceptions, our best at the time, and our rules at the time, in retrospect were not always sufficient."

According to Mr Kilu, a clear change occurred in the serving of non-resident customers at Estonian banks four years ago, when awareness began to grow regarding the risks facing the sector. "Since then, Estonian banks have undertaken many efforts to reduce eastward and potentially more risky business volumes," he noted. "The turnover of payments made from Russian banks to Estonia and the volume of Russian clients' deposits in Estonian banks has decreased fourfold over the past four years. We agree with Financial Supervision Authority (FSA) director Kilvar Kessler's statement that recent years' cooperation between the FSA and banks has taken the fight against money laundering in Estonia to a new level."

The approved money laundering prevention due diligence measures indicates the next step.

"While banks have, until now, established their money laundering prevention systems based on existing legislation, regulations and internal procedures, we have now agreed to a standard that is more precise than legal requirements," Mr Kilu explained. "These regulations will be mandatory for our member banks — a so-called minimum level that must in any case be met by banks operating in Estonia."

It was generally agreed that banks have to employ improved due diligence measures both in establishing business relations and in cases involving clients with above-average risks, including not just non-residents but also those offering several new products and services, individuals with a state background, and private banking clients. Banks must also avoid business relations with companies lacking genuine economic activity, and in the case of non-residents, it is important to pay attention to their ties to Estonia.

The due diligence measures also call for increased interbank cooperation regarding increasing awareness of whistle-blowing opportunities to employees, employee training as well as the sharing of client-related information in connection with high-risk clients and criminally suspect transactions.

The EBA also shared the following recommendations with the five political parties elected to the next Riigikogu, which the sector believes should be reflected in the coalition agreement:

-The implementation of the reverse burden of proof, according to which assets can be seized if cover-up activities have been proven and the money's legitimate origin cannot be seen.

-The promotion and improvement of state registers, including the listing of actual beneficiaries in the Commercial Register, which is necessary in order to allow banks to more easily gather as much necessary information as possible regarding a client's background and activity.

-The improvement of information exchange between state institutions and banks, which will allow banks and supervision authorities to exchange information regarding clients as well as warnings regarding specific suspected money laundering-related incidents and trends.

In addition to specific recommendations regarding Estonian legislation, the EBA also stressed the importance of European-wide cooperation in the prevention of money laundering, as such a crime is cross-border in nature and effectively impossible to contain using only internal measures.

Editor: Aili Vahtla

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