The ministry made its remarks in the aftermath of nearly €50 million obtained from fines issued in the U.S. relating to the Danske Bank money laundering case.

Now, a draft bill on the Financial Intelligence Unit's (FIU) so-called super data warehouse is stalled at the Riigikogu, while restricted access to the enforcement register, which the FIU and other authorities heavily leaned on in obtaining data in money laundering and other cases, has been hampering information exchange, the ministry says.

Not only that, but the political will to fight money laundering in Estonia seems to have waned, the ministry claims.

A year ago, Estonia took in €48 million from the U.S., from the fine imposed on Danske Bank following a high-profile money laundering case at its Tallinn branch. The money was clearly earmarked – to create a system which would prevent a similar international scandal from ever happening again.

According to Evelyn Liivamägi, deputy secretary general at the Ministry of Finance, while millions of euros in support have been allocated to improve tech solutions and money laundering analysis capacities, political momentum in tackling money laundering has waned.

"The Americans have been monitoring closely whether we are complying with international anti-money laundering rules, and how we have performed in various evaluations, for example with [Council of Europe anti-money laundering committee] Moneyval. At the same time, they are observing whether we are complying with the European rules, as Estonian banks' funds also move via American credit institutions. If they suspect that the rules have not been sufficiently followed, at some point dollar payments to banks will simply be cut off. If we are not good enough in combating money laundering, this could at some point hit our financial system very painfully," Liivamägi said.

Ministry official: International experts have called on Estonia to boost analytical capabilities

Combating money laundering nowadays increasingly relies on the analysis of massive datasets. According to Liivamägi, international anti-money laundering experts have also instructed Estonia to boost its analytical capacities.

However, this is precisely where the significant setbacks have happened over the past year. The draft bill on the FIU's super data warehouse is still stalled at the Riigikogu, and is with its Finance Committee, though it has been adjusted considerably over the past six months too. "We have excluded private individuals' bank account data from the development of strategic analytical capacity, in order to mitigate the risk of infringing on privacy. This analysis would cover state registers, reports filed with the FIU, plus data on legal entities, which is significantly less sensitive than is private individuals' bank account information," Liivamägi explained.

The deputy secretary general said that without automated analysis, each authority has been forced to work in its own isolated database, which does not allow for seeing the big picture or identifying complex criminal patterns.
The Ministry of Finance says it is also highly concerned about the day-to-day exchange of information related to money laundering. Since the FIU's access to the enforcement register has been restricted, the unit's work has become much slower than previously.

"Internationally, it has been stipulated that when financial intelligence units request information from another country, for example about the movement of a specific person's funds, but that information does not come quickly from Estonia – if it takes 30 days or more – this starts to raise questions. Next the question arises: Why are we hindering the fight against money laundering," the deputy secretary general of the Ministry of Finance explained.

The draft bill concerning the so-called enforcement register, however, is making slow progress. ERR recently reported how, for example, lawyers found numerous shortcomings in the draft prepped by the Ministry of Finance. The Supreme Court recently also restricted the FIU's ability to request data from companies.

This means that the agency can no longer rely on the methods it previously had done. "We will have to change our supervision and our approach. We must accept what the Supreme Court has said and adjust our practices accordingly. Even though the public expectation is that supervision must be effective and must prevent money laundering scandals – we do not have the tools to do so to that extent. As to what that extent is, we will analyze that in the coming weeks," said Matis Mäeker, FIU head.

At the start of January, the head of the data bureau said that the solution would be to amend the Financial Intelligence Unit Act, which would grant them the rights they had previously used to request data from companies.

€26 million of U.S. funds have been utilized so far

Although legislative amendments are dragging on, €26 million of the funds allocated by the U.S. have already been funneled into specific projects.
For example, the Tax and Customs Board (MTA) is developing, at a cost of over €5 million, a solution to detect crypto transactions.

According to Liivamägi, the volume of transactions is so vast that officials can no longer manage them manually in any case. "There are very many transactions and an official cannot go through them in an Excel spreadsheet," she noted.

The new system must be able to automatically determine whether taxes have been paid on crypto assets and whether criminal patterns occur in transactions.

The Financial Supervision Authority (Finantsinspektsioon) is also directing nearly a million euros toward improving data analysis and supervision. This includes tools for monitoring crypto asset transactions as well as a digital information system which speeds up fit-and-proper assessments.

In total, a specially established commission composed of civil servants approved nine project applications in the autumn to which the Danske Bank fine money would be allocated.

The projects are being implemented by the Prosecutor's Office, the Police and Border Guard Board (PPA), the MTA, the Environmental Board, the Internal Security Service (ISS), the Estonian Academy of Security Sciences (Sisekaitseakadeemia), Finantsinspekstisoon, plus all three ministries involved in the committee's work: the justice, finance and interior ministries.

Ministry of Justice would support investigative journalism with Danske funds

Since €26 million have been directed to projects, this means that €22 million remain unallocated.

Laidi Surva, deputy secretary general at the justice ministry, said that the next call for project proposals is planned for this year. It is scheduled to take place in the spring or early summer, she said.

It has not yet been decided which projects the remaining tens of millions of euros from the Danske Bank fine will be directed to, and there are several ideas.

"One idea is an open call to support media literacy or investigative journalism. The Danske case showed that the media played a very important role. We have very strong investigative journalists in Estonia and abroad, thanks to whom crimes and criminal networks are discovered or prevented. We want to amplify that field," Surva said.

Where the funds from the fines obtained from the U.S. will ultimately be directed to is to be decided by consensus, by a three-member commission consisting of the permanent secretaries of the Ministry of Justice and Digital Affairs, the Ministry of Finance, and the Ministry of the Interior. A representative of the U.S. Embassy in Estonia is also to take part as an observer.

Background:

In Estonia, a trial began in November 2023 involving six individuals charged by the Prosecutor's Office with money laundering crimes at the now-closed Estonian branch of Danske Bank. According to the indictment, the six people: Dive men and one woman and all former employees of the Estonian branch's non-resident banking unit, had together organized large-scale money laundering totaling billions of euros at the branch between 2007 and 2015, deliberately concealing the true owners of the suspicious funds transferred through Danske Bank Estonia's accounts as well as the origin and nature of the criminal proceeds.

--

Follow ERR News on Facebook and X and never miss an update!