Estonia’s money laundering regulator highlighted a number of issues it establish within local crypto firms, similar to dodgy execs and nonsensical business plans. 

Nearly 400 virtual asset service providers (VASPS) have freely shut down or had their authorizations revoked in Estonia succeeding the government’s newly upgraded Terrorist Financing Prevention and Anti-Money Laundering laws (AML) that neared into effect in March. 

The amended laws expanded the defined scope of VASPs, needed enterprises to have legitimate links to Estonia, raised licensing fees, and capital and information reporting necessities, along with presenting the Financial Action Task Force Travel Rule.

According to a May 8 statement from the Estonian Financial Intelligence Unit (FIU), the amendment to the AML laws on March 15 has since seen nearly 200 domestic crypto service providers voluntarily close down.

Another 189 similarly had their authorizations revoked due to “non-compliance with the necessaries. ”

“ Given the documents submitted by the service providers that have lost their authorizations, and their techniques of operation and the threats 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, ” remarked Matis Mäeker, the director of the Financial Intelligence Unit, adding:

“In renewing authorisations, we saw situations that would surprise every supervisor.”

Following the hefty clear-out, there were 100 active crypto enterprises registered in Estonia as of May 1, according to the FIU.

The FIU highlighted a number of general issues it found within the companies it forcibly shut down, particularly relating to misleading company data.

To name some examples, some companies had enrolled board members and company connections unbeknownst to the actual individuals themselves. different companies had a number of people on the books who had falsified professional backgrounds on their resumes.

It similarly appears that numerous companies had copied and pasted identical business plans from each other, which were similarly found to be lacking “any logic or connection with Estonia.”

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Estonia has made a considered effort to enact strong AML laws across the board over the past some years. This is primarily due to the discovery in 2018 that around $235 billion value of illicit capital had been laundered through the Estonian branch of Denmark megabank Danske Bank.

The ongoing war between Russia and Ukraine has similarly had an impact, as Estonia has pushed to “ cut off revenues supporting Russia’s war machine and protect international financial systems, ” via strong AML regulation as part of its partnership with the U.S. 

Another factor that probably has contributed to the newly enhanced AML laws is its membership in the European Union, thus meaning it'll soon have to execute the forthcoming Markets in Crypto-Assets (MiCA) laws that are slated to near into effect in early 2025.

Under MiCA, crypto enterprises will be subject to stringent AML and terrorism prevention necessaries.

(BRIAN QUARMBY, Cointelegraph, 2023)