The Republic of Estonia has revealed that 100 active firms are providing digital asset services under new rules designed to incorporate stricter AML/KYC requirements. At the same time, the new rules have invalidated 389 crypto firms which were previously authorized but no longer meet the legal requirements.
In a statement by the Estonian Financial Intelligence Unit (FIU), Matis Mäeker, the Director of the agency, provided an update on virtual asset service providers.
“Given the documents submitted by the service providers that have lost their authorisations, and their methods of operation and the risks involved, it can be argued that the legislator’s response with regard to the amendments to the Act, and the supervision activities both before and after the amendments, have been relevant. In renewing authorisations, we saw situations that would surprise every supervisor.”
The Money Laundering and Terrorist Financing Prevention Act took effect on 15 March 2022. The FIU said that service providers abandoned nearly 200 authorizations. At the same time, the FIU revoked almost the same number of authorizations due to non-compliance with the requirements.
Some of the platforms apparently reported individuals as members of the boards or company contacts who were not aware they were listed as being affiliated in such a manner. Some CVs were said to be false, and some individuals did not have a “proper business reputation.” The FIU also said that business plans submitted by several companies “were identical and lacked any logic or connection with Estonia.”
Mäeker said they would continue to review applications for authorizations but soon they would shift into daily on-site supervision of these firms. He added that peers in other countries have noted their regulatory improvements and risk management of crypto firms.
In the summer of 2021, in Estonia there were nearly 650 active authorizations of providers of virtual asset services.
The Financial Intelligence Unit said it will exercise continuous supervision of money laundering and terrorist financing prevention.
Estonia is a jurisdiction that has been supportive of Fintech innovation. At the same time, in the past it has gained a reputation for loose regulation of certain types of activities. As global scrutiny of AML/KYC shortcomings have increased, the country has moved to align oversight with global norms.