Estonia’s crackdown on money laundering in the cryptocurrency sector has exposed numerous problems within local crypto firms, including questionable executives and nonsensical business plans. In response to the government’s expanded Anti-Money Laundering (AML) and Prevention of Terrorist Financing laws, nearly 400 Virtual Asset Service Providers (VASPs) have either voluntarily closed or revoked their licenses since the laws took effect in March.
The amended AML laws expanded the scope of VASPs, required legitimate links to Estonia, increased license fees, and capital, and information reporting requirements, and introduced the Financial Action Task Force’s travel rule. According to a May 8th statement from Estonia’s Financial Intelligence Unit (FIU), the change led to the voluntary closure of about 200 domestic crypto service providers, while another 189 had their licenses revoked for noncompliance.
Matis Mäeker, the director of the Financial Intelligence Unit, emphasized the relevance of the legislative response and supervisory activity given the documents and work practices of the affected service providers. The FIU’s clearance reduced the number of active crypto firms in Estonia to 100 as of May 1st.
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The recent crackdown in Estonia is a testament to the country’s commitment to fighting money laundering and strengthening the integrity of its financial system
During their investigation, the FIU discovered several general problems in the companies they closed, mainly related to misleading company information. Some companies had registered board members and company contacts without their knowledge or consent. Others had individuals on their payrolls who had falsified their professional backgrounds on their resumes. In addition, many companies had submitted identical business plans that lacked any logical connection to Estonia.
Estonia has been actively working to strengthen its AML laws after it was revealed in 2018 that approximately $235 billion in illicit capital was laundered through the Estonian branch of Danske Bank, a Danish megabank. In addition, Estonia’s commitment to curb revenues in support of the Russian war machine and protect international financial systems amid the ongoing conflict between Russia and Ukraine has played a role in enforcing robust AML regulations. The country’s partnership with the United States has further encouraged the implementation of strong AML measures.
In addition, Estonia’s membership in the European Union has necessitated the imminent adoption of crypto asset market (MiCA) laws, which are scheduled to take effect in early 2025. As a result, Estonia has likely taken proactive steps to improve its AML laws to align with MiCA requirements. Under MiCA, crypto firms will be subject to strict measures to prevent money laundering and terrorism.
The recent crackdown in Estonia is a testament to the country’s commitment to fighting money laundering and strengthening the integrity of its financial system. By addressing issues in the crypto sector and enforcing stricter regulations, Estonia aims to create a more transparent and secure environment for virtual asset service providers while aligning with international standards and EU directives.
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First published in COIN KURIER, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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