The national risk assessment on money laundering, terrorism financing, and the financing of weapons of mass destruction (covering the years 2020 to 2024), presented on Monday, stated that the overall money laundering risk level in Estonia has remained moderate over the past five years.

While the overall level of money laundering risks and vulnerabilities has not changed significantly over the past five years and remains moderate, the assessment found, the greatest threats and weaknesses are now linked to gambling operators holding Estonian licenses.

This represents a shift from the previous assessment, published five years ago, where the main listed risks were associated with virtual currency service providers.

The Covid pandemic starting in 2020 brought about a major shift in the gambling sector, with the number of online gambling users in Estonia having multiplied during that time and since then, Rainer Osanik, head of the financial intelligence policy department at the Ministry of Finance, said.

The main issues related to gambling companies not directly connected to Estonia; these have faced difficulties in complying with both Estonian and international regulations, Osanik added.

Osanik noted that pointing the finger at the entire gambling sector would be the wrong thing to do, as companies that operate locally in Estonia have not seen a concomitant rise in risk.

Part of the higher risk assessment when it comes to gambling is also the result of the introduction of a new methodology, he added.

In the case of online gambling, for example, the origins of the funds being played are not always clear, neither is the identity of the player always known – in other words, if it is actually the individual associated with the account being used, Osanik explained.

At the same time, some coalition MPs have drafted a bill that, among other things, would reduce the gambling tax. The sponsors of the bill, some MPs from the Reform Party and most of Eesti 200's MPs, claim doing so would make Estonia a more attractive gambling market destination, and thereby increase tax revenue.

However, Finance Minister Jürgen Ligi (Reform) outlined on Monday, during the presentation of the risk assessment, that tax breaks to gambling would represent a "new political risk." Ligi said he has warned "governments, politicians, and colleagues" that no tax breaks should be granted to gambling companies, to avoid greater risk accumulation.

Deputy secretary general at the Ministry of Finance Evelyn Liivamägi noted, however, that the other component of the same bill focuses on bolstering supervision over online gambling providers and, for instance, tightening conditions for new license applicants.

Money laundering as a 'service' has been on the rise

As noted, money laundering has mainly involved the movement of criminal proceeds obtained abroad through Estonia's financial system, Liivamägi said at Monday's presentation.

Money laundering as a "service" has, however, been rising, meaning that criminal networks have been using intermediaries and service providers to conceal the origin of funds.

While the general risk level is moderate, this risk varies by sector. In addition to gambling, higher-risk sectors include credit institutions — meaning banks — virtual currency service providers, as in previous years, and corporate service providers.

The assessment also singled out Estonia's famed e-residency program: While this in itself does not create new money laundering risks, the assessment found, the scheme's operation may make some offenses easier and cheaper to commit by those with nefarious intentions, especially when combined with other e-services.

The vulnerability level of Estonia's national anti–money laundering system is likewise assessed as moderate, the report noted, pointing out weaknesses including a lack of judges specialized in money laundering cases, which can serve to prolong court proceedings more than needed. The courts also face a high burden of proof; that there are problems in international cooperation as well as in the seizure and confiscation of assets were also referred to as issues.

While gambling as a way of money laundering might seem counterintuitive, given the house edge, the process often does not get as far as placing bets: Often chips are purchased with illicit funds, but not gamed with, or with only token amounts of play used, before they are re-converted to "clean" funds.

Third parties can be used to gamble on the launderer's behalf, and sometimes the launderer themselves actually own the casino, meaning their "losses" go back to them anyway.

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