“Providing service to non-residents and the flow of money into Estonia, neighbouring countries and other EU member states from parts east has been a part of banking in the era following the restoration of independence. We are doing our best, as we did under rules in force in the past, to prevent Estonian banking infrastructure from being used for criminal purposes. Unfortunately we have to admit that doing our best in the past and the rules in force at that time were not always sufficient when we look back from the standpoint of today’s rules and understanding,” said chairman of the management board of the Estonian Banking Association, Erki Kilu. “Four years ago, a clear shift took place in the servicing of non-residents when awareness of the risks in this field started to emerge. Since that time, Estonian banks have made a number of efforts to potentially shrink the higher-risk and eastern-origin business volumes. Four years later, the volume of payments made from banks in Russia to Estonia and the volume of deposits held by Russian clients in Estonian banks are down to one-quarter of their previous level. We concur with what Financial Supervision Authority (FSA) director Kilvar Kessler has said – that the fruits of cooperation between the FSA and banks have taken the AML to a new level in Estonia.”
“With the approval of the anti money laundering due diligence measures, we are taking the next step. To this point, banks have proceeded from legislation, regulations and the internal work procedures for developing AML systems but now we are agreeing on a standard that is more precise than what is required under law. For our member banks, these guidelines are obligatory – the so-called minimum level that banks must meet in every situation,” said Erki Kilu in explaining the idea behind the guidelines.
General principles agreed on are that banks must use enhanced due diligence upon establishing business relationships as well as during business relationship in the case of high-risk customers, which include providers of innovative products and services, politically exposed persons and private banking clients. Banks must refrain from business relationships with companies that lack actual business activity. As to non-residents, it is important to devote attention to the nature of their connection to Estonia. The guidelines also set forth greater cooperation between banks in the field of encouraging whistleblower employees, training personnel and sharing information about high-risk customers and transactions suspected of being of criminal origin.
The Banking Association also submitted the following proposals to the political parties represented in the next parliament, which the sector feels should be covered in the coalition agreement:
- Introducing the reverse onus clause into legislation. The EBA supports the introduction of the reverse burden of proof into Estonian legislation and allowing confiscation of assets in cases where evasive activity has been proven and the legal origin of funds is not apparent.
- Promotion of state registers. The EBA believes that it is necessary to improve the quality of various registers (such as the information on beneficial ownership at the Commercial Register) and restructure registers (such as supplementing the register of declarations of economic interest). This is necessary for banks to be able to retrieve information for background checks and inspections of activity more easily than is currently possible.
- Improving exchange of information between government and banks. The EBA supports initiatives that allow information on customers and warnings on incidents related to specific money laundering suspicions as well as trends to be exchanged between banks and regulators.
In addition to specific proposals pertaining to Estonian legislation, the EBA emphasizes the importance of pan-European cooperation in the field of anti money laundering, as this is a global, cross-border category of crime that is essentially impossible to control only through domestic measures.
The EBA’s anti money laundering, counter terrorism financing and enforcement of financial sanctions policy and guidelines can be found at https://pangaliit.ee/anti-money-laundering/aml-policy-and-guidelines-of-banking-association
Operating since 1992, the Estonian Banking Association is the representative organisation of Estonian banks. The Estonian Banking Association’s 12 member banks employ 5,000 people, serve 2.2 million customers and own 25 billion euros in assets, of which 19 billion euros are loans granted to the Estonian economy. The Estonian Banking Association’s main objectives are to develop Estonian banking and coordinate joint activities of the member banks. The Estonian Banking Association is a member of the European Banking Federation.
Erki Kilu, Chairman of the Management Board of the Estonian Banking Association
Telephone 515 7232