Regulator Says Estonian Crypto Market Vulnerable To Crime

Estonia’s crypto regulator says money laundering and terrorist financing risks are high after customer numbers and exchange volumes swelled recently, according to another report provided by the agency. Licensed crypto institutions in Estonia have 4.5 million customers overall, storing around 20 billion euros in exchange flows between August 2020 and August 2021. There are currently 381 organizations with crypto licenses in the country, but only 15 institutions account for the majority of transactions with a disproportionately large number of dealings with high-risk countries, according to the report.

The Financial Intelligence Unit says it received an increased number of inquiries and requests for legal assistance from authorities abroad, with 100 such requests, relating to fraud and suspected serious financial crimes, in 2021. This represents a 20% increase over the previous year.

A large amount of assets facilitated by 15 companies have been transferred to Luxembourg, Syria, Pakistan, Greece, Montenegro, Serbia and Belize, the report said, with assets often coming from Russia, Japan, Switzerland and North and South America.

Another red flag, the agency said, was that about two-thirds of crypto companies were initially registered at just four addresses in Tallinn.

In December, the government approved plans to reform regulations in the sector; The new rules will impose due diligence and audit requirements as well as higher levels of capital for crypto firms before their money laundering policies are reviewed this quarter. The proposed rules still need parliamentary approval.

Estonia has revoked about 2,000 crypto licenses in recent years in a massive regulatory crackdown on the sector. The latest report from the country’s Financial Intelligence Unit found that many of the remaining registered companies lack a real presence in Estonia, making them impossible to supervise. The report adds that companies often do not have a clear business plan and lack the required financial knowledge.

Estonia began issuing cryptocurrency licenses in 2017, becoming one of the first countries to do so.

News summary:

  • Regulator says Estonian crypto market is vulnerable to crime
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