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2020 Estonian AML Act: what are the upcoming changes?

On 11.12.2019. Estonian Parliament in the third reading approved changes in Money Laundering and Terrorist Financing Prevention Act (further AML code).  

As of today (17.01.2020) the FIU has issued 1256 virtual currency wallet service provider licenses and 1379 virtual currency exchange licenses. All of the license holders will be directly affected by the changes in the AML code. If you are interested in applying for cryptocurrency licences in Estonia keep reading. 

The amendment bill was introduced last year in April with the purpose of obtaining the Crypto-licences more difficult and thereby increasing the capacity of the authorities to deal with the applications. It was obvious from the first moment that many of the proposed changes required a thorough revision but the revision was made only for the worse.

Changes in the AML law will be in force from March 10, 2020. 

Companies who have licenses will have a transition period until July 1st, 2020 to implement the upcoming changes. If you are considering to make the application on behalf of your company(as a legal person), it is advised to contact us as soon as possible and not to wait until March the 10th.

State fee for virtual currency service provider license EUR 3300.

Until March 10 2020, the current state fee is EUR 345 per license, thereafter, the fee increases to 3300 Eur for the new “Virtual currency service provider” license. The new license merges the existing form of the licences into a single Currency operator licence. This seems to be a smart move as the numbers do not necessitate separate applications due to the nature of the business.

Processing time increase

The current time limit for application processing is 30 working days. This requirement will change to 60 working days with a possible extension up to 120 days in case the FIU deems it necessary. This is an improvement in our opinion as the original proposal was set for 90 working days.

Bank Account /IBAN number

An IBAN number will become necessary at the time of the application. This new requirement will be creating a vicious circle, as in practice, the main prerequisite of opening a bank account at a banking institution is to provide valid crypto-operating licences. 

Share capital for virtual currency service providers EUR 12 000. 

Share capital minimum is being increased to 12 000 Eur instead of the standard 2500 Eur for a LLC. In our opinion, the excessive amount does not correspond to a certain calculation and time will tell the necessity of this requirement. One opinion is that higher capital contribution distinguishes the more serious operators in the market from the try-outs that may inflict damage in the market. The existing licence holders are also required to raise their share capital until July the 1st 2020.

The physical presence of management in Estonia. 

The new proposal requires that the management of the company must reside in Estonia. This is a  quite contradictory demand in Estonia, as in one hand country is establishing itself as the prime location for the digital business management globally and on the other obligating companies to move to Estonia.  The new requirement automatically means that the company’s registered office, board’s location and place of establishment is in Estonia. 

Possibility of American citizens obtaining licences

In the absence of criminal records, it is not possible to apply or obtain licences from FIU. This was mainly a problem for the US citizens as the provided document was not eligible to qualify as a criminal record. The new proposal allows submitting a statement under oath at an Estonian Notary, thereby paving the way for US citizens applications. How this arrangement will work is yet to be seen as the Estonian Notaries are very reserved in providing mechanisms alternative to digital methods and not very keen on submitting statements/applications on your behalf.

Detailed information about the business 

At the moment FIU does not demand detailed information about your business. The reference documents are KYC/AML/CTF manuals and risk appetite statements. The new proposal will require you to provide more detailed information about your business processes.

These are some of the most important changes which will affect all current and future crypto operators holders in Estonia. If you are interested to know further about the changes with regards to “risk appetite”, KYC measures, access to the e-Residency database, cooperation with shell banks, etc.  We are a phone call away. Please contact us through the form and lets schedule a call!

About the author, Estonian Crypto Licenses

He’s the founder and managing director of FinTech Legal Center, which provides pan-European legal, compliance, accounting, Hr and strategy advice to Fintech businesses. His customers say he can make extremely complicated details easy for business people to understand and digest. Further, according to them, he’s the calm in the storm.

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About Estonian Crypto Licenses

Estonian Crypto Licenses is a trading name of TechIuris OÜ, a company based in Tallinn, Estonia and specialised in legal and compliance solutions for European FinTech companies. We are a fully licensed company, and EVEA and e-Residency marketplace members. Here on our blog, we share the latest news on topics such as NFTs, cryptocurrencies, blockchain and much more.

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