Money laundering (ML) and terrorist financing (TF) are major threats to global financial systems and security. To combat and mitigate these issues, international bodies like the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) analyze, assess and monitor countries’ compliance with established standards. Recent progress reports on Estonia and Slovakia underscore the strides these nations have made in strengthening their anti-money laundering (AML) and counter-terrorist financing (CFT) regulations and frameworks.
Understanding MONEYVAL’s Role
MONEYVAL, a permanent monitoring body of the Council of Europe, assesses its member states’ adherence to international AML/CFT standards. Its evaluations are based on the Financial Action Task Force (FATF) Recommendations, which serve as the global benchmark for AML/CFT measures. Through mutual assessments and follow-up reports, MONEYVAL provides elaborate analyses of countries’ AML/CFT systems, pointing out strengths, weaknesses, and areas requiring improvement.
Slovakia’s Progress in AML/CFT Measures
In November 2022, MONEYVAL released a follow-up report acknowledging Slovakia’s advancements in combating ML and TF. The report noted that Slovakia had enhanced its compliance with FATF standards, resulting in upgraded and better ratings in several areas. Specifically, the country’s ratings were elevated from “partially compliant” to “largely compliant” in four key areas:
ML/TF Risk Assessment: Slovakia adopted an action plan to manage and combat ML and TF risks, addressing previously detected deficiencies.
Reporting Suspicious Transaction: The country enhanced its requirements for reporting suspicious transactions to the Financial Intelligence Unit (FIU), assuring more effective monitoring of potential ML/TF activities.
Designating a Competent Authority for ML: Slovakia established a competent and able authority to investigate ML cases, strengthening its institutional framework for AML efforts.
Maintaining Comprehensive Statistics: The nation improved its apparatus for collecting and maintaining panaromic statistical data related to AML/CFT, facilitating better analysis and policy development.
However, the report also accentuated areas needing further attention.
In the field of modern technologies, particularly concerning virtual assets, Slovakia’s rating deteriorated due to identified deficiencies. The report stressed on the need for Slovakia to prioritize measures to combat ML/TF risks associated with new technologies and to ensure that the private sector effectively manages and mitigates higher risks. Out of the 40 FATF recommendations, the Slovak Republic is currently rated as compliant on five recommendations, largely compliant on 23 recommendations and partially compliant on 12 recommendations.
Estonia’s AML/CFT Landscape
Estonia has been farsighted and proactive in addressing AML/CFT challenges, especially following high-profile money laundering scandals involving its financial institutions. In January 2023, MONEYVAL published a mutual evaluation report evaluating Estonia’s AML/CFT measures. The report provided a comprehensive feedback and review of the effectiveness of Estonia’s AML/CFT system and its standard of compliance with the FATF Recommendations.
The assessment acknowledged Estonia’s commitment to strengthening its AML/CFT framework, noting improvements in regulatory measures and supervision of financial institutions. However, it also pinpointed areas where further enrichments were necessary, particularly in implementing effective risk-based stewardship and ensuring that non-financial sectors adhere to AML/CFT obligations.
Overall, out of the 40 FATF recommendations, Estonia is currently rated as compliant on seven recommendations, largely compliant on 19 recommendations, and partially compliant on 14 recommendations.
Key Challenges and Recommendations
Both Estonia and Slovakia face common challenges in their AML/CFT efforts, including:
Acclimatizing to New Technologies
The rapid evolution of financial technologies, such as virtual assets, presents new avenues for ML/TF activities. Both countries need to ameliorate their regulatory frameworks to address risks associated with these technologies effectively.
Strengthening Supervision
Guaranteeing that both financial and non-financial institutions comply with AML/CFT obligations requires stringent supervisory mechanisms. Improving the capacity and resources of supervisory authorities is essential for effective oversight.
Meliorating International Cooperation
Given the cross-border nature of ML/TF activities, international collaboration is significant. Both nations should continue to engage with international partners to share information and coordinate efforts in combating ML/TF.
MONEYVAL’s progress reports on Estonia and Slovakia highlight the importance of ongoing evaluation and improvement in the battle against money laundering and terrorist financing. While both countries have made important and noteworthy strides in enhancing their AML/CFT frameworks, continuous efforts are necessary to address emerging challenges, particularly those posed by new financial technologies. By implementing MONEYVAL’s recommendations and maintaining a visionary approach, Estonia and Slovakia can further strengthen their defenses against financial crimes, contributing to the holistic integrity and security of the global financial system.
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