The new version of the Terrorist Financing and Prevention Act, adopted by the Riigikogu at the end of last year and coming into force on March 10, will fundamentally change the requirements that the state imposes on cryptocurrency service providers. The changes include, among other things, a nearly five-fold increase in share capital as well as the requirement that the company being registered in the Estonian register and actually operate in Estonia.
The purpose of the amendments is to tighten the conditions for the authorization of virtual currency and wallet providers in order to reduce the risk of money laundering and terrorist financing related to these services.
The stricter requirements are not limited to newcomers. During the transition period, which runs until July 1 this year, all those already licensed must also bring their activities and documents in line with the new requirements.
The preparation should be taken very seriously, because if the company involved in the virtual currency service is not ready by the deadline, the FIU will revoke its license on 1 July 2020.
We have pointed out the most important new requirements, which should be taken into consideration:
Requirements relating to the location of the business
The registered office, management board and place of business of the undertaking must be in Estonia. If a foreign company operates in Estonia through a branch registered in the commercial register, its registered office and head office must be in Estonia. According to statistics, the majority of regulated companies are non-residents. This means that a foreign entrepreneur must establish a branch in Estonia in order to comply with the requirements of the license.
Requirement for share capital
The share capital of the company must be at least EUR 12 000. The share capital must be fully paid up in cash.
Payment account requirement
The entrepreneur must have a payment account with a credit institution, an electronic money institution or a payment institution, which is established in Estonia or a contracting state of the European Economic Area and provides services in Estonia cross-border or operates in Estonia through a branch.
In order to comply with the requirements of the new version of the authorization, the trader must provide the FIU with a list of all payment accounts held in its name, together with the unique identifier of each payment account and the name of the account holder.
Evidence of the operator’s background, suitability and good repute
The company must provide documentation on the member of its management body and the prosecutor, including the level of education, a complete list of jobs and positions and, in the case of a member of the management body, the area of responsibility.
As there is a similar requirement in the current law, many of the undertakings have already submitted the documents referred to with the application for authorization. Therefore, each operator should check which documents he has already submitted when applying for the license and then assess which additional documents should be provided, if any.
The undertaking must also furnish such other documents as it deems essential to establish that its member of the management body, the prosecutor, the beneficial owner and the owner have an impeccable business reputation.
Identity documents and documents proving the absence of criminal convictions
If the entrepreneur, a member of its management body, a prosecutor, a beneficial owner or a sole proprietor is a foreign national, copies of the identity documents of all nationalities must be submitted to the FIU. In this case, a certificate from the criminal record of all states of nationality or an equivalent document issued by a competent judicial or administrative authority certifying the absence of a criminal offense against the State or for money laundering or other intentionally committed offenses shall also be provided. No more than three months may have passed from the date of issue of the certificate. The certificate shall be notarised or certified by a notary and shall be validated by apostille or a replacing legalization.
It is therefore the responsibility of the undertaking, as a whole, to provide evidence that it has the knowledge, skills, experience, education, professional qualifications and excellent business reputation required to provide the service. The information provided on a person’s suitability must be exhaustive and sufficient and adequately reflect the suitability of the person.
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