The draft law from the Ministry of Finance stems from criticism voiced last summer by Chancellor of Justice Ülle Madise who said the Taxation Act unclearly defines conditions on which the Tax and Customs Board (MTA) can access the enforcement register outside criminal proceedings.

At the time, the chancellor pointed out that government agencies — primarily the Financial Intelligence Unit (FIU) — had access to bank account statements showing transfers, card payments, incoming and outgoing funds and their timing, even though the law did not explicitly authorize such access.

Following this, the minister of justice and digital affairs restricted both the MTA and the FIU's use of the register, leaving the FIU without any access and allowing the tax authority to send only enforcement-related orders through it.

At the same time, the enforcement register's data exchange channel is an important working tool for the tax authority and according to the explanatory memorandum accompanying the draft completed in March, the restrictions prevent effective oversight of tax obligations. The FIU also needs access to the register to perform its statutory duties; otherwise, its ability to combat money laundering would be reduced.

For this reason, the draft amendments to the Taxation Act and the Anti-Money Laundering and Counter-Terrorist Financing Act — sent by the Ministry of Finance for interagency approval — more clearly establish that the FIU's right to obtain account data via the enforcement register for the performance of its duties also includes bank secrecy. This secrecy covers all data and assessments that have become known to a bank about its own or another credit institution's client.

"The aim of the amendment is to more clearly define the practices that existed prior to the restrictions, not to expand the FIU's powers in obtaining information," the explanatory memorandum states.

In line with the justice chancellor's recommendations, the draft also clarifies that bank secrecy includes bank account statements. In addition, the FIU would have the right to obtain balance data, as well as information on account opening and closing dates and IBAN numbers, via the enforcement register. The draft also defines the specific tasks for which the FIU may access data covered by bank secrecy.

These include combating money laundering and terrorist financing, organizing international communication and information exchange, fulfilling obligations under the International Sanctions Act and handling misdemeanor proceedings specified in the anti-money laundering law.

According to the explanatory memorandum, account statements are a central analytical tool when investigating suspected money laundering, helping identify activities that allow the FIU to assess whether money laundering has occurred.

"Analyzing such data makes it possible to identify ways of concealing or transforming the origin of assets and to assess whether assets have been obtained through criminal means," the memorandum explains.

The law would also be amended to prohibit institutions from informing clients about FIU inquiries or other information exchanges related to combating money laundering and terrorist financing.

"If an obligated entity were to inform a client that the FIU has requested information about them, it could enable that person to conceal or relocate assets, destroy evidence or adjust their activities in a way that makes detecting money laundering more difficult," the explanatory memorandum states.

The FIU would decide whether a person can be informed about inquiries made about them and disclosure may not be possible even after five years. However, if a person becomes aware, such as in the course of criminal proceedings, that the FIU has processed their data, the FIU may assess whether information can be provided.

"Given the specific role of the Financial Intelligence Unit, there is reportedly no practice in other EU countries whereby FIUs automatically inform data subjects at regular intervals about the processing of their data," the memorandum notes.

The draft also requires the tax authority, when requesting information via the enforcement register, to include an explanation of the circumstances necessitating the request. This explanation must state why the tax authority was unable to obtain the required information directly from the taxpayer — in other words, the MTA may request information via the register only if obtaining it from the individual has failed.

The explanatory memorandum further notes that if the MTA and FIU were to collect data without using the enforcement register, the process would be slow, cumbersome and costly. The current Taxation Act framework was created at the initiative of the Estonian Banking Association specifically to enable the automation of information requests submitted through the enforcement register.

It also emphasizes that the FIU's right to access bank secrecy data, including account statements, is not unique to Estonia, as in most countries financial intelligence units have a legal basis for obtaining such information in order to combat money laundering and terrorist financing.

According to the draft, the changes are expected to reduce the administrative burden on banks as well as the workload of both the tax authority and the FIU.

Justice minister wants FIU merged with PPA

Minister of Justice and Digital Affairs Liisa Pakosta (Eesti 200) said on the "Otse uudistemajast" webcast Wednesday that her understanding of the anti-money laundering draft differs from that of Finance Minister Jürgen Ligi (Reform) and that she has submitted a rather critical opinion on the matter.

Pakosta also noted that, in her view, the Financial Intelligence Unit (FIU) should once again be placed under the Police and Border Guard Board (PPA) in order to establish civilian oversight over its activities.

At Thursday's government press conference, Pakosta said the state must be organized in such a way that when individuals are monitored or investigated, there is civilian oversight — meaning parliamentary supervision. According to her, this should be arranged by the Ministry of Finance.

Asked whether her proposal to return the FIU to the PPA implies that it cannot function effectively under the Ministry of Finance, Pakosta replied that in a democratic state governed by the rule of law, surveillance and investigative activities must be properly structured.

"This situation needs to be put in order," Pakosta said.

Ligi, however, stated that the FIU is neither a law enforcement body nor an investigative authority and there are no plans to turn it into one.

"It is a collector and analyzer of data related to money laundering risks. This is not a uniformed activity; it is not comparable to the police," Ligi said, adding that removing the FIU from under the police was one of the rare correct decisions made during the tenure of EKRE's Martin Helme as minister.

According to Ligi, the FIU operates very professionally under the Ministry of Finance, has more tools at its disposal and efforts are ongoing to expand these further while ensuring that no legal violations occur.

--

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