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Editor’s note: In the latest installment of our series, the moneylaundering.com legal team reviews Estonia, Latvia and Lithuania’s campaigns against financial crime.

In June 2019, the European Union publicly censured six countries, including Baltic neighbors Latvia and Estonia, for failing to address major gaps in their defenses against illicit finance.

The bloc delivered its unconventional rebuke despite a modest uptick of enforcement in the Baltics, including Latvia’s assessment of a €1.4 million fine in November 2016 against the local branch of Swedbank for violating the country’s Law on the Prevention of Money Laundering and Terrorism Financing.

In the years following Swedbank’s censure, Latvia, Lithuania and Estonia finalized enforcement actions against Paysera LT, Signet Bank AS, JSC Citadel Banka, JSC PrivatBank and GFC Good Finance Company AS, and upgraded their anti-money laundering and counterterrorist financing  regimes amid international pressure.

Estonia

Estonia’s Riigikogu, or Parliament, updated the nation’s Money Laundering and Terrorist Financing Prevention Act in June 2020, thus completing its implementation of the EU’s Fifth Anti-Money Laundering Directive, or 5AMLD, and addressing deficiencies cited by the European Commission.

In October, Matis Maeker, head of AML supervision at Estonia’s Financial Supervisory Authority, or FSA, highlighted a new mathematical model developed jointly with the country’s central bank, the Bank of Estonia, to more closely review payments to and from the country’s 14 lenders and react more efficiently when risks emerge.

The Estonian Financial Intelligence Unit, or FIU, which became an independent government agency on Jan. 1, plans to ramp up scrutiny of the cryptocurrency industry this year, Finance Minister Veiko Tali disclosed.

These and other elements of Estonia’s bolstered campaign against financial crime should play well with Moneyval, the Financial Action Task Force’s representative in Europe, which launched its fifth evaluation of the country in December.

Lithuania

Six months earlier, in June 2020, Moneyval noted Lithuania’s progress towards eliminating gaps in its regulation and supervision of cryptocurrency in line with 5AMLD, as well as the country’s undertaking of a new national risk assessment to identify the nascent sector’s exposure to financial crime.

Lithuania’s overall campaign against money laundering and related violations received a boost in the first half of 2020, when the country’s legislative branch, the Seimas, adopted several measures targeting organized crime, corruption and illicit finance.

One of the reforms authorizes law enforcement to confiscate assets suspected of originating from crime based on certain thresholds, such as significant variances between suspects’ lawful and actual incomes. Another adopted reform, a new version of Lithuania’s Law on Lobbying Activities, aims to make the political process more transparent.

Lithuanian officials also disclosed plans last year to establish the AML Centre of Excellence, a public-private forum to enhance AML-related cooperation between regulators, law enforcement agencies and financial institutions.

Most recently, on Jan. 21, the Bank of Lithuania announced that the eight nations that comprise the Nordic-Baltic constituency of the International Monetary Fund—Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden—had petitioned the IMF to conduct an analysis of the region’s vulnerabilities to illicit finance.

The IMF’s findings, which have yet to be disclosed, could guide the region’s anti-financial crime efforts in the years to come.

Latvia

After a damning assessment from Moneyval in August 2018, Latvia, home of ABLV Bank, froze more than €100 million at the now-defunct lender and launched a dramatic AML overhaul to escape FATF’s gray list of nations with subpar controls against financial crime.

In June 2019, the country’s legislative chamber, the Saeima, expanded the role of the Financial and Capital Market Commission to cover anti-money laundering and counterterrorist financing, and imposed beneficial ownership requirements on local limited companies, foundations, unions, farms and fishing enterprises, partnerships and other entities.

Those efforts paid dividends in January 2020, when Latvia become the first of Moneyval’s 47 members to be ranked largely or fully compliant with each of FATF’s 40 recommendations. Two months earlier, Latvia joined France, Germany, Italy, the Netherlands and Spain in calling for the creation of an EU-wide AML supervisor.

Latvia now plans to improve financial crime investigations, seize more illicit assets and enhance exchanges of financial intelligence with other nations, Ilze Znotina, head of the country’s FIU, said in an annual report last year.

Anti-corruption reform has become a front-and-center issue in Latvia this year after an evaluation by the Council of Europe’s Group of States Against Corruption, GRECO, found the nation deficient in all areas.

Contact Laura Cruz at lcruz@acams.org