Yesterday the Parliament of the Republic of Estonia in the 3rd reading approved the bill on amendments to the Money Laundering and Terrorist Financing Prevention Act and the Act of State Duty. Today this document was sent to the President of the Republic of Estonia for approval. For the most part, these amendments affect cryptocompanies with cryptolicenses in Estonia. Further in the article you will find translated into English, modified Act. Kindly note that Private Financial Services has all solutions for existing cryptocurrency license holders to comply with new Act and for those who would like to establish their cryptocurrency business from scratch as well. Please contact our specialists to get more information.

The main points

• The name and structure of licenses are changing;
• The period of of application review is extended;
• The cost of the State Duty for application review is increasing by almost 10 times;
• The size of the required contributed share capital is increasing;
• Physical presence in Estonia is required;
• Amendments enter into force on 10.03.2020;
• Existing enterprises need to put their businesses in order by 1st of July, 2020

BILL

Third Reading

11.12.2019

8 SE III

Law on Combating Money Laundering and the Financing of Terrorism and the State Duty Lae

Amendment of the Money Laundering and Terrorist Financing Prevention Act

The following amendments shall be made to the Law on Money Laundering and Terrorist Financing Prevention:

1) Paragraph 10 of Subsection 1 of Section 2 shall be amended and worded as follows:

• «“10) virtual asset service providers»

2) Paragraph 11 of Subsection 1 of Section 2 shall be declared invalid;

3) Section 2 shall be supplemented by Subsection 5 as follows:

• «(5) The provisions of this Law on financial institutions shall apply to the virtual asset service providers referred to in Paragraph 10 of Subsection 1 of this Section»

4) Section 3 shall be supplemented by Subsection 9¹ as follows:

• «9¹) the virtual asset service is the service specified in Paragraphs 10 and 10¹ of this Section»

5) Section 3 shall be supplemented by Subsection 10¹ as follows:

• «10¹)the service of virtual asset exchange is a service in which a person exchanges virtual assets for money, or money for virtual assets, or one kind of virtual assets for other assets»

Section 70

Paragraph 4 of Subsection 1 of Section 70 shall be amended and worded as follows:

• «4) offer of virtual asset services»

Paragraph 5 of Subsection 1 of Section 70 shall be declared invalid;

Subsection 3 of Section 70 shall be supplemented by Paragraphs 9 to 11 as follows:

• • «9) if an enterprise, a member of its governing body, a procurist, a real beneficiary or an owner, who is an individual, is a citizen of a foreign state, then copies of identification documents confirming the absence of the punishment specified in Paragraph 8 of this Subsection for all countries of his/her citizenship;
  • 10) documents concerning a member of the governing body of an enterprise and a procurist, containing information on the level of education, a full list of jobs and positions, as well as concerning a member of the governing body and the area of his/her ​​responsibility, as well as documents that the applicant considers it important to present in order to prove the reliability of a member of the governing body , as well as the fact that the applicant has good business reputation;
  • 11) a list of payment accounts maintained on behalf of the enterprise together with a unique identifier for the payment account and a name of the account holder.»

Section 70 shall be supplemented by Subsection 3¹ as follows:

• • «(3¹) If the documents referred to in Paragraphs 8 or 9 of Subsection 3 of this Section issued by the country do not prove the absence of punishment in the required scope, they shall be accompanied by an affidavit of a person whose lack of punishment is required to be proved.»

Subsection 4 of Section 70 shall be amended and worded as follows:

• • «(4) When applying for a license in the field of activity specified in Paragraphs 1 or 4 of Subsection 1 of this Section, the information specified in Subsection 3 of this Section shall be supplemented with information specifying which financial service or virtual asset service will be provided.»;

Section 70 shall be supplemented by Subsection 6 as follows:

• «(6) An enterprise shall submit applications and communications related to the license specified in Subsection 1 of this Section only in accordance with the principle of a single point of contact through the Estonian public services portal or through a notary public.»;

Section 71 shall be amended and worded as follows

«Section 71. Issuance of a license and refusal to issue a license

With regard to a license application, the Financial Intelligence Unit shall make a decision to issue a license or to refuse to issue a license within 60 days from the date of application. By decision of the Financial Intelligence Unit, a license issuance period may be extended to 120 days.»

Section 72 shall be amended and worded as follows

«Section 72. Subject of license verification

(1) A license shall be issued to an enterprise if:

1) it, a member of its governing body, a procurist, a real beneficiary and an owner does not have a valid punishment for an offense against the state, or for money laundering, or for another intentional crime;

1¹) the persons referred to in Paragraph 1 of this Subsection have a good business reputation;

2) the contact person appointed by the enterprise in accordance with Section 17 of this Law complies with the requirements specified in this Law;

3) a subsidiary of the enterprise for the activity of which it is intended to use the license being applied for in the name of the enterprise, meets the requirements specified in Paragraphs 1 and 2 of this Subsection;

4) the location, the location of a board and the place of business indicated in the register of the enterprise applying for the license in the field of activity specified in Paragraph 4 of Subsection 1 of Section 70 of this Law is Estonia, or the foreign business association operates through the Estonian branch entered in the Commercial Register, the place of business and location of which leader is Estonia;

5) The enterprise applying for the license in the field of activity specified in Paragraph 4 of Subsection 1 of Section 70 of this Law has a payment account with a credit institution, an electronic money institution or a payment institution established in Estonia or in the country of the Treaty on the European Economic Area and provides cross-border services in Estonia, or founded a branch in Estonia;

6) The share capital or charter capital of the enterprise applying for the license in the field of activity specified in Paragraph 4 of Subsection 1 of Section 70 of this Law is at least 12,000 euros, which are fully paid in cash.

(2) The existence of a good business reputation shall be assessed by the licensing institution, taking into account the person’s previous activities and the circumstances surrounding it. The fact of a good business reputation is assumed, if there are no circumstances calling it into question.»

The Law shall be supplemented by Sections 118¹ and 118² as follows

«Section 118¹. Equivalence of a license of a virtual service provider

A license of a service provider of virtual asset exchange for money and a license of a virtual wallet service provider issued pursuant to this Law shall be considered equivalent to a license of a virtual asset service provider.

Section 118². Aligning the activities of an enterprise with a valid license with the Revision of this Law adopted on 11 December 2019

(1) An enterprise that obtained a license pursuant to this Law shall bring its activities and documents into compliance with the requirements of paragraphs 9 to 11 of Subsection 3 of Section 70 and Paragraphs 1¹, 4, 5 and 6 of Subsection 1 of Section 72 of the Revision of this Law adopted on 11 December 2019 no later than 1 July 2020.

(2) If, by the time specified in Paragraph 1 of this Section, an enterprise does not bring its activities in accordance with the Law and does not submit the documents, the Financial Intelligence Unit will invalidate the enterprise’s license.»

Amendment of the State Duty Law

The text of Section 269 of the State Duty Law shall be amended and worded as follows:

«For the consideration of a license application issued pursuant to the Money Laundering and Terrorist Financing Prevention Act, the state duty shall be paid as follows:

1) for the provision of services of trust funds and commercial associations, pawnshop services, as well as in connection with precious metals and precious metal products, except for precious metals and precious metal products used in manufacturing, or for scientific purposes and medicine, or for purchase or wholesale of precious stones shall be 345 euros;

2) for the activities as a financial institution or the offering of a service in the field of virtual assets ​​shall be 3,300 euros».

Effective date of the Law

The effective date of this Law shall be 10 March 2020.

Henn Põlluaas,

President of the Riigikogu

Tallinn, 2019

Submitted by the Finance Commission on 09.12.2019.

The Commission’s proposal is to conduct a final vote.

A simple majority vote is required to pass the bill.
(certified by digital signature)

Aivar Kokk,

Chairman of the Finance Commission