ESTONIA Law and Practice Contributed by: Yuliya Barabash, Ivan Nevzorov, Daria Lysenko and Nikita Prokopenko, SBSB FinTech Lawyers
2.15 Financial Action Task Force (FATF) Standards Anti-money laundering and sanctions rules in Estonia fully comply with the standards set by the Financial Action Task Force (FATF). In the context of fintech com - panies, this means applying a risk-based approach, mandatory KYC, customer due diligence, transac - tion monitoring, and reporting of suspicious activity. In addition, the Financial Intelligence Unit is actively engaged in monitoring, countering and searching for criminally obtained funds. 2.16 Reverse Solicitation The reverse solicitation scenario is not directly regu - lated in Estonia by a separate regime, so, in practice, the regime that operates within the EU legislation is applied. This means that customers from Estonia can independently contact foreign providers who do not actively market to the Estonian market and do not directly attract customers from the country. At the same time, it should be remembered that any form of targeted advertising, systematic work with customers in the country or local presence may lead to the appli - cation of European and Estonian legislation, including for fintech companies. 3. Robo-Advisers 3.1 Requirement for Different Business Models In Estonia, different classes of digital assets require different business models and corresponding licens - ing regimes. For most cryptocurrencies and utility tokens, regulation under the Markets in Crypto-Assets Regulation (MiCA) applies, and for transactions with such assets (trading, exchange, custody), a company must obtain the appropriate CASP licence. Models related to electronic money tokens require an addi - tional credit institution or e-money institution licence. As for security tokens, since they are financial instru - ments, they are subject to financial instrument regu - lations, in particular MiFID II, and companies must obtain an investment firm licence and, in some cases, prepare a prospectus.
subject to secondary requirements when interacting with them. Industry associations also play an important role, such as FinanceEstonia, which has no regulatory functions but works to create an environment for companies to grow, particularly in the fintech sector. 2.13 Conjunction of Unregulated and Regulated Products and Services Estonian fintech companies sometimes offer unregu - lated services alongside regulated ones, but this prac - tice is usually subject to careful oversight by Finantsin- spektsioon . Unregulated products (such as analytical services, software or technology solutions, etc) are structured as ancillary services related to the main activity. In many cases, they are provided through a separate legal entity (to avoid regulatory risks and clearly separate licensed activities). It is important that the regulator emphasises that the structure should not mislead customers about the nature of the services, and companies must ensure transparency and appro - priate disclosure of information, and manage potential conflicts of interest. 2.14 Impact of AML and Sanctions Rules AML and sanctions regulation has a significant impact on Estonian fintech companies. The main require - ments are set at the level of European and national legislation, and supervision, as mentioned at 2.2 Reg- ulatory Regime , is carried out by the Financial Intel - ligence Unit in co-operation with Finantsinspektsioon for companies subject to licensing. Regulated participants are required to implement mechanisms and strictly adhere to KYC, customer due diligence, transaction monitoring, and sanctions screening procedures, as well as report suspicious transactions to the FIU. It should be noted that unreg - ulated companies may be subject to obligations if they perform functions related to financial flows or cus - tomer identification. Thus, AML compliance is one of the key factors for the activities of fintech companies and their ability to operate in the Estonian market.
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