Money Laundering and Terrorist Financing Prevention Act draft takes VASPs under discussion

The first reading of the draft on the Money Laundering and Terrorist Financing Prevention Act (MLTFPA) in Estonia takes place on 26.01 where several amendments regarding virtual assets service providers (VASPs) are under discussion.



Here is a brief overview of the main new positions and changes under review that the updated act

will most probably cover:


1. The circle of obligated persons will be expanded with the additional definitions of VASPs who must take into account the requirements of MLTFPA in their activities.

2. All VASPs need to identify the people using their services. The information needed has to include a place of birth and “unique identifier of the transaction”. The exact definition of the latter is still not decided and the Ministry of Finance is open to proposals from market participants in this regard.

3. When establishing the identity of a natural person, additionally to the name, a personal identification code (in the absence thereof, date of birth), residence or seat needs to be collected, and information on the identification and control of the right of representation and its scope, as well as data on the means of communication of a natural person.

4. Obligation to collect certain data on the originator and recipient of the transaction. This data should be provided without a delay and in a secure manner to all parties involved in the virtual currency exchange or transfer transaction.

5. Market participants have made a number of drafting suggestions regarding the differences in due diligence measures, such as:

  • VASP may request the FIU to defer the due diligence obligations if all the conditions set out in the proposal are met.

  • The FIU may refuse to consent to the use of an information technology tool if any of the following circumstances occurs upon the entry into force of MLTFPA:

a) VASP has not entered into a contractual relationship with the provider of

the respective IT tool;

b) there is no description of the use of the given information technology

tool in the internal procedures;

c) the VASP has not submitted to the FIU the internal procedures which

contain the obligations provided by law; or

d) VASP has not implemented an information technology tool in its

information systems. ”


6. The draft also sets out the obligation for VASPs to submit an application to their supervisory authority if they wish to operate abroad.

7. A person may hold a board management position in up to two virtual asset service providers.


8. With regard to the requirements for a board member (education, experience, good repute, etc.), market participants agree with the legislator that the suitability of Fit & Proper for a board member should be maximized.


9. The criterion “professional experience” set for a member of the Management Board has been specified at the request of market participants.


10. The VASP has to audit the annual report by using an external audit firm. The new MLTFPA draft states the requirements for the external audit firm as well as an internal control function and data retention.


11. Requirements for the own funds and control of the virtual asset service provider shall be established.


12. The VASP has to keep the documents, copies of documents, and data related to the performance of obligations, which in most cases is 5 years after termination of the business relationship, making the transaction, or performing the duty to report.


13. If a company has not submitted all the specified information and documents required for the application for an activity license or the information is incorrect, misleading, or incomplete or it has not been duly completed, the FIU will not review the application.


14. The share capital requirement of a VASP is increased from 12,000 euros to 350,000 euros. Market participants want a justification here where the following was explained by the Ministry of Finance:

a) at least 125,000 euros if the VASP provides one or more:

● Virtual currency wallet service

● Virtual currency exchange service

● the issue, offer or sale of virtual currency or the provision of related

financial services;


b) at least 350,000 euros if the VASP provides a virtual currency transfer service.

The capital requirement of 125,000 euros is linked to a requirement for an investment firm

stated in the Securities Market Act if the firm also holds and manages the client's securities.

350,000 euros has been used as an analog of the capital requirement of an electronic money

institution.

15. It is planned to apply a supervision fee equal to 0.035% of the total amount of transactions initiated or received in the course of the provision of the virtual currency transfer service.


If you need any consultancy on how to move forward, what needs to be changed or what type of

procedures need to be set in place in order to be aligned with the changed MLTFPA, contact us.

We’re happy to provide 1-1 consultancy or train the whole team of yours.