The Financial Intelligence Unit started on-site inspection at Garantex Europe OÜ in December 2021. “In June 2021, when I became the Director of the Financial Intelligence Unit, I decided that the first task will be to quickly identify virtual currency service providers that are at higher risk, to start on-site inspections of them based on the risk. Garantex Europe OÜ clearly stood out from others because its annual transactions amounted to more than 5 billion euros and a large part of the business and customers were related to Russia and other high-risk countries," said Matis Mäeker, Director of the Financial Intelligence Unit.
The supervision by the Financial Intelligence Unit revealed weaknesses on part of Garantex Europe OÜ in several critical aspects of the prevention of money laundering and terrorist financing. Risk management measures were inadequate both in terms of staff shortage and internal control, and both the risk appetite document and internal rules of procedure were inadequate as well. Also, over 90% of the customers have been subject to the breach of the duty to verify identity. Some of the customers presented to the Financial Intelligence Unit as natural persons were legal persons providing services to other customers, and several of them had a turnover ranging from about twenty million to a hundred million euros. A significant deficiency that was found was that Garantex Europe OÜ failed to systemically and systematically notify the Financial Intelligence Unit of suspicious transactions concerning money laundering or terrorist financing. The Financial Intelligence Unit also found that the property that had been moved through Garantex Europe OÜ was related to crime or wallets used by criminal offenders for illegal purposes.
"Garantex Europe OÜ applied for an authorisation in Estonia but did not take steps to be familiar with the rules of the game here or to comply with them in substance. Service providers like this do not have a place in Estonia. Furthermore, there is no place in Estonia for service providers using the jurisdiction here for illegal purposes,” Mäeker added.
Garantex Europe OÜ was authorised to provide virtual currency services between 27 November 2020 and 24 February 2022.
As of 31 December 2021, a total of 381 valid authorisations for economic activity have been issued in Estonia for the provision of virtual currency services, which is the largest number of such authorisations per country in the world. On 23 February 2022, the parliament Riigikogu adopted a draft Act tightening the requirements for market entry and provision of virtual currency services.
