Following the government’s recently improved Terrorist Financing Prevention and anti-money laundering regulations (AML) that went into effect in March, around 400 Virtual Asset Service Providers (VASPS) have voluntarily shut down or had their authorizations revoked in Estonia.
The updated regulations broadened the defined scope of VASPs, required enterprises to have real links to Estonia, raised license fees, 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 laws has resulted in the voluntary shutdown of around 200 domestic crypto service providers. In addition, around 189 people had their authorizations withdrawn owing to “non-compliance with the requirements.”
“Given the documents submitted by the service providers who have lost their authorizations, as well as 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,” said Matis Mäeker, Director of the Financial Intelligence Unit, adding: “In renewing authorizations, we saw situations that would surprise ev
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 companies it forced to close, including those involving deceptive company information.
To give a few examples, some companies had registered board members and corporate contacts who were unknown to the actual individuals, while others had a lot of people on their books who had faked professional credentials on their resumes.
It also appears that several companies copied and pasted identical 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 strong anti-money laundering measures across the board. This is primarily due to the revelation in 2018 of over $235 billion in illicit capital laundering through the Estonian branch of Denmark’s megabank Danske Bank.
The continuing conflict between Russia and Ukraine has also had an impact, as Estonia has advocated for strict AML regulation as part of its collaboration with the US in order to “cut off revenues supporting Russia’s war machine and protect international financial systems.”
Another factor that likely contributed to the recently strengthened AML rules is the country’s participation in the European Union, which means it will soon have to implement the impending Markets in Crypto-Assets (MiCA) laws, which are due to take effect in early 2025.
Crypto companies will be subject to strict AML and terrorist prevention rules under MiCA.