“The so-called Panama Papers and Bahama scandals have demonstrated that preventive activities have become more and more important in the fight against tax fraud and avoiding taxes,” Ministry of Finance Deputy Secretary-General for Financial Policy and External Relations Märten Ross said in a press release. “For this purpose, both Estonia and other EU member states will from now on gather more information on the actual beneficiaries of their country’s companies, and will in the future exchange this information as well.”
Previously, only credit and financial institutions were held responsible for identifying actual beneficiaries in the framework of conducting customer background checks. In the future, however, all legal persons will be responsible for knowing their actual beneficiaries and disclosing information about them. This information can be viewed electronically via the Central Commercial Register once the relevant provisions enter into force.
The new law will grant tax authorities access to information concerning an entrepreneur’s actual beneficiary, which will enable the more efficient checking of information pertaining to financial accounts, among other things.
In addition, an automatic centralized mechanism will enter into force in 2019 which will enable investigative bodies to quickly identify owners of bank and payment accounts. A credit and financial institution which has established a bank or payment account with an IBAN identification for the customer in the framework of a business relationship will be required join the electronic attachment system.
Through this system, the institution must make available the name or names of the account owner or the person making transactions on their behalf, information on the actual beneficiary of the account owner, the account’s IBAN number and the dates of opening and closing the account. Only state institutions in the scope necessary for their activities will receive information regarding the owners of the bank and payment accounts.
The law will also increase the ceiling of the pecuniary fine issued for not implementing measures to prevent money laundering and the financing of terrorism, which will increase from the current €32,000 to up to €40,000. Raising the fine is necessary, as the current rate is not in accordance with the potential income earned from the violation and, as a result, does not sway those guilty toward avoiding committing the offense in the future.
The ceiling of large sums of cash will be decreased from €15,000 to €10,000, as such transactions are already rather unusual. All traders must implement due diligence in the case of such sums of cash.
There are approximately 120,000 such legal persons in Estonia who must file information regarding actual beneficiaries in the country’s information systems.
A one year transition period is intended for the obligated persons for the implementation of new requirements. One exception from the general date of entry into force is Sep. 1, 2018, for the entry into force of provisions concerning the declaration of actual beneficiaries to the Central Commercial Register by the legal persons. A second exception is Jan. 1, 2019, for the entry into force of provisions concerning the making available of information on the owners of payment accounts.