To take on money-laundering, banks have to invest more in smart solutions
The precept and fine issued by Finantsinspektsioon to SEB Pank on Thursday illustrated the need for banks in Estonia to develop their know-your-client systems to make them smarter.
“It is unfortunate that despite the efforts that banks in Estonia have made in recent years to deal more systematically with the risks of money laundering and terrorist financing than previously, the results are still not good enough. Money laundering has no place in Estonia”, said Deputy Governor of Eesti Pank Maive Rute.
Ms Rute said that the precept and fine from Finantsinspektsioon would not affect the loans or deposits of SEB clients as the bank is well-capitalised and profitable and has good liquidity.
A positive point that she highlighted is that the Estonian financial market as a whole is strong and sustainable. Thanks to the constant hard work by Finantsinspektsioon, the banks operating in Estonia have changed their business strategies and risk management so that the primary focus in providing services is on local clients whose backgrounds are well known to the banks. Deposits from outside the euro area are only 1% of all the deposits of the banks.
“Even so, the banks must make more effort and investment to be able to track down attempts at money laundering better and faster and to make sure that work to stop money laundering does not push honest clients out. This needs more to be invested in smart information systems above all, and the financial position of the banks in Estonia is good enough for them to do that”, she added.
Moving forward it is important that the state move quickly to improve the anti-money laundering legislation. It is at least as important that the state direct sufficient resources to the institutions combating money laundering so that they can do their work effectively. Given this, it is of critical importance that on 17 June the Riigikogu passed the changes to Estonian legislation required by the fourth and fifth directives European anti-money laundering directives. The changes will improve the quality of data on actual beneficial owners, will allow the international operations of the banks to be monitored better, and will make information exchange between the institutions concerned more efficient.
Finantsinspektsioon identified shortcomings in the systems at SEB Pank for combating money laundering and terrorist financing, and on Thursday issued a precept to the bank and a total fine of one million euros for four misdemeanours.