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Nearly 400 virtual asset service providers (VASPS) have voluntarily closed or had their permits revoked in Estonia following the government’s recent Prevention of Terrorist Financing and Anti-Money Laundering (AML) laws that came into effect in March.
The amended laws expanded the scope of VASPs, required firms to have legal ties to Estonia, increased licensing fees and capital and information reporting requirements, and introduced a travel rule for the Financial Action Task Force.
According to a May 8 statement from the Estonian Financial Intelligence Unit (FIU), following the March 15 amendment to AML laws, almost 200 local cryptocurrency service providers have been voluntarily shut down.
While about 189 people also lost their permits due to “non-compliance”.
“Given the documents submitted by service providers who lost their permits, their methods of work and the risks associated with it, it can be argued that the reaction of the legislator in relation to the amendments to the Law and the oversight activities both before and after the amendment were relevant,” said Mathis. Mäker, Director of the Financial Intelligence Unit, adding:
“When renewing permits, we faced situations that would surprise any manager.”
According to the FIU, after a major cleanup, as of May 1, there were 100 active cryptocurrency companies registered in Estonia.
The FIU highlighted a number of common problems it found in forced closures, in particular related to misleading information about companies.
To name a few examples, some companies had registered board members and company contacts without the knowledge of the real people themselves, while other companies had a few people on the books who falsified professional experience on their resumes.
It also turned out that many companies copied and pasted identical business plans from each other, which were also found to lack “any logic or connection with Estonia.”
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Over the past few years, Estonia has made a deliberate effort to enact strong AML laws across the board. This is primarily due to the discovery in 2018 of the laundering of illegal capital in the amount of about $ 235 billion through the Estonian branch of the Danish megabank Danske Bank.
The ongoing war between Russia and Ukraine has also had an impact, with Estonia pushing for “an end to the revenues supporting the Russian war machine and the protection of international financial systems” through strict AML regulation as part of its partnership with the US.
Another factor that likely contributed to the recently strengthened AML laws is its membership in the European Union, which means it will soon have to put in place future Crypto Asset Markets (MiCA) laws due to take effect in early 2025. of the year..
According to MiCA, cryptocurrency companies will be subject to strict anti-money laundering and anti-terrorism regulations.
