Estonia’s money-laundering authority highlighted a variety of flaws it discovered among local crypto businesses, including dubious executives and illogical business models. Following the government’s recently updated Terrorist Financing Prevention and Anti-Money Laundering regulations (AML) that went into effect in March, around 400 virtual asset service providers (VASPS) voluntarily shut down or had their authorizations revoked in Estonia.
The updated regulations broadened the specified scope of VASPs, required enterprises to have real ties to Estonia, raised licensing costs, increased capital and information reporting requirements, and implemented the Financial Action Task Force Travel Rule. According to a May 8 statement from the Estonian Financial Intelligence Unit (FIU), the March 15 modification to AML legislation has resulted in the voluntary shutdown of around 200 domestic crypto service providers.
According to the FIU, there were 100 active crypto companies registered in Estonia as of May 1 following the massive clear-out. The FIU identified a number of common concerns it discovered throughout the firms it forced to close, including those involving deceptive company information. It also appears that several firms copied and pasted similar business ideas from one another, which were determined to be devoid of “any logic or connection with Estonia.
Over the last few years, Estonia has made a concerted effort to adopt robust anti-money laundering measures across the board. This is largely due to the revelation in 2018 of over $235 billion in illicit capital laundering through the Estonian branch of Denmark’s megabank Danske Bank.
According to reports, the continuing conflict between Russia and Ukraine has had an effect, as Estonia has sought to “cut off revenues supporting Russia’s war machine and protect international financial systems. Another aspect that has likely contributed to the newly strengthened AML rules is its participation in the European Union, which means it will soon have to adopt the impending Markets in Crypto-Assets (MiCA) legislation.
