Estonia’s New AML/CFT Regulatory Regime Sparks 80% Downfall in Licensed Crypto Firms

Since May 2023, Estonia’s updated crypto AML/CFT regulations have resulted in an 80% reduction in crypto amend from 489 to 100. Following stricter checks under the amended regulations, the Financial Intelligence Unit  (FIU) found “a lot of suspicious circumstances” in the applications of crypto firms.

Crypto service providers have dramatically decreased since Estonia’s anti-money laundering and countering financial terrorism regulations were amended last year. According to the updated Money Laundering and Terrorist Financing Prevention Act, a year ago, 489 crypto firms had operated licences. However, by May 1 2023, only 100 crypto firms used.

Based on the information provided by the Estonian Financial Intelligence Unit (FIU), 389 operating licences have been voluntarily withdrawn or revoked based on the FIU’s actions. Almost 200 companies retracted or were revoked by the authority.

According to a statement from the FIU, in response to strict checks required by the amended regulations, “a lot of suspicious circumstances have been found” in the licence applications of crypto firms.

In an official statement, director of the Financial Intelligence Unit, Mäeker added, “This calls into question the credibility of the businesses that wanted to come here and their actual desire to provide services in Estonia,” he further added, “It also shows the desire of some individuals to use the Estonian economic system and financial system for illegal activities.”

As a result of the FIU’s operations, several instances have been uncovered in which individuals were appointed as board members or contact persons without their knowledge. The CVs of some of these individuals were forged, whilst the reputations of other individuals were substandard.

Several companies submitted their business plans to an independent agency that overlapped in areas such as financial forecasts. Moreover, many had typos and lacked sufficient logic. The regulator reported that many firms used the same corporate or legal services providers.

“When renewing operating licences, we saw situations that would raise an eyebrow at every supervisor,” noted Mäeker.

Additionally, the FIU noted that it would continue to review the operating licences of crypto firms. Moreover, it hopes to “return to normality in terms of supervision, where we will move from a largely paper-based assessment to daily on-site supervision.”

The Estonian government is regarded as one of the most crypto-friendly governments in Europe, along with Switzerland, Denmark, Germany, and Slovenia. According to the Baltic nation’s regulator, approximately 650 crypto services licences were valid as of 2021, when Matis Mäeker became its new head.

However, the country’s regulators have taken steps to crack down on crypto firms over the past few years. At the time of revocation, there were 500 cryptocurrency companies whose licences had been revoked by regulators, translating into approximately 30% of the total number of approved providers. More European scandals have undermined public confidence in the authorities’ capabilities to combat money laundering.

Suggested Reads:

UAE TO DEMONSTRATE EFFECTIVE FINANCIAL CRIME PREVENTION TO BE REMOVED FROM FATF GREY LIST

AUSTRALIA TO BAN CREDIT CARDS FOR ONLINE GAMBLING TO PREVENT PAYMENT FRAUD