"This is possible, for example, if one pays a membership fee of an organization and this organization deals with obscure matters through one of its branches operating in another country," KYC Product Owner of Creditinfo Rita Viitmann gave an example. "In this way, businesses and individuals can become unsuspectingly involved in money laundering schemes," she said.
Jaanus Leemets, Creditinfo's Business Development Director, added that the money laundering scheme may not be visible at first. "Everything may seem like a normal business transaction, for example, the other party to the transaction may be sanctioned or involved in terrorist financing in another country - so each of us can actually feed money laundering," he said.
However, according to Kai Paalberg, Head of Risk Management at Grant Thornton Baltic OÜ, things have improved significantly over the last three years. "Amendments to the Money Laundering Prevention Act have been introduced since 2017, and the risk assessment at the national levels is constantly updated". Paalberg gave the example that according to the latest amendments, the field of crypto and virtual currency service providers is monitored with even more depth. Transactions with works of art and the activities of sworn auditors, as well as the purchase and sale of real estate, are also receiving increasing attention.
Paalberg points out that since all parties to a transaction have to prove the movement of their money, for example in the case of real estate, it acts as a mutual control. "Whoever buys real estate goes to the bank, real estate broker and notary - everyone asks him the same questions, because everyone is subject to the same law," she explained. "If everything is related to the collection of data and at the same time they are not allowed to exchange data with each other, then it fulfills the goal that everyone controls everyone and if someone finds something suspicious, the matter can be investigated immediately," Viitmann added.
According to Leemets, the amount of data collected is quite large, but its purpose is one - everyone must understand the origin of money involved. "In addition, it is important to know the counterparty of the transaction, not only that the transaction is correct, but also that the background of the other party is clean, he has not been sanctioned and he has not been able to handle anything criminal," the expert explained.
If the background of the other party is not clear and questions remain about the origin of the money, the transaction must be canceled. However, GDPR does not help to prevent data transmission. "The requirements related to the prevention of money laundering are beyond the GDPR," Leemets emphasized.
According to Paalberg, it is possible to exercise control over the counterparty of the transaction, and new registers are constantly being created for this purpose. She gave the European Commission's list of sanctioned persons as an example and added that there were several other large international databases. "At the same time, using some of them is quite expensive," she said.
However, in many cases, it is enough to find people in different search engines to find the background. "As long as information is searched for in search engines and treated rationally and the reliability of the source is assessed, it is reasonable to use this information," said Leemets. Paalberg added that when using search engines, it is important to make sure that the data is up-to-date and to pay attention to when it was last updated. "It is certainly not possible to trust only one source," she emphasized.
According to Viitmann, how one or another organization controls data and thus combats money laundering must be set out in the company's own internal rules. "Everyone has to determine the internal processes, but it is certain that in order to start a business relationship, it is necessary to collect data and then monitor it."
Subsequent monitoring is important because companies divide, merge and change ownership quite often. "Beneficiaries and owners, as well as representatives, are changing, and so it is important to keep an eye on things all the time, a lot is not done today or is done too infrequently," Viitmann pointed out the problem.
Background checks and subsequent monitoring are easy within Estonia, the commercial register and credit information can be used, but cross-border information collection is much more complicated. "That's why we have created an international background research service and offer the opportunity for a company that wants to make even one query, to do so through us without buying an expensive comprehensive service from somewhere in the register," Paalberg noted. "This way, there is no need to pay expensive connection fees to global databases," she gave an example.
According to Viitmann, it is one thing to get or buy data, but you also have to be able to do something with it. "I recommend companies to take part in trainings where they are taught to look at the data - it's like new literacy today," she emphasized.
Paalberg pointed out that not all companies should be analyzed in the same way. "It is necessary to check according to the level of risk, it is worth thinking that if the level of risk is low, is it still worthwhile to direct so much energy to this low-risk company," she suggested. "The use of automated solutions would also help reduce the amount of energy used to prevent money laundering. There are players in the market who help to collect data, identify people and monitor them - these solutions are still very little used and instead time-consuming manual work is done, ” she gave an example.
According to Paalberg, being well informed about the profile of business partners helps to avoid later inconveniences. "Problems often only appear when the goods have moved and the transaction has been handed over and a transfer is being made to the bank - then the bank discovers something suspicious and puts its hand in front," she gave an example of a possible problem.
Nevertheless, the experts found that although Estonia's reputation has been damaged by money laundering cases, our data is moving quite well compared to the European average, and therefore monitoring and avoiding problems is actually within everyone's reach.
Author: Karl-Eduard Salumäe, Äripäev
