Who must prove the true origin of assets?
The Ministry of Finance has sent for approval the draft of the Money Laundering and Terrorist Financing Prevention Act according to which, in case of suspicion of money laundering, the legal origin of assets should be proven by the owner of the assets. The aim of the amendments is to mitigate the risk of occurrences of major international money laundering cases.
Money of unknown origin is the biggest problem
The main problem of preventing money laundering is the money of unknown origin transferred to the accounts of Estonian credit and payment institutions. When investigating the origin of the assets, the investigative authorities have found themselves in a situation where the origin of the money used in such schemes cannot be identified because answers to the requests of international legal assistance are delayed or not sent at all. Thus, often there is no possibility to start criminal proceedings against the participants in the scheme on the basis of characteristics of the crime of money laundering.
At the same time, the increased measures and due diligence of banks affect mostly the so called normal users, honest entrepreneurs and investors who are forced to present a lot of information when doing business in Estonia, which means increased administrative burden and various costs.
Due to the above, the Ministry of the Interior and Estonian Banking Association have proposed the Ministry of Finance to establish the reverse burden of proof.
The origin of money must be proven in case of suspicion
The amendments set forth in the draft oblige the owner or possessor of assets to submit proof on the legal origin of the assets in order to establish the economic purpose of the transaction related to the assets, connections with actual economic activities, stakeholders and their final beneficiaries. However, this is applicable only for cases where the Financial Intelligence Unit has applied restrictions to the use and disposal of the assets and the available information refers to concealed origin of the assets. Furthermore, this is also applicable if the owners of the assets fail to cooperate with the investigators. For example, avoid proceedings, try to verify the origin of the assets or transactions performed with it with forged documents or documents that do not reflect reality. No additional obligations to prove the origin of their assets are imposed on regular people using everyday financial services.
The Chamber of Commerce supports the goal of the draft to decrease the risk of occurrence of major international money laundering cases. If the current practice for identifying money laundering cases has not been efficient, it should be changed.
According to the Constitution, nobody in the criminal proceedings is obliged to prove their innocence. Consequently, the burden of proving the guilt of the accused lies on the state.
The Chamber finds that the measure set forth in the draft is, most likely in short-term perspective, efficient and very important from the point of view of weight of public interest. However, this amendment is a significant exception in the Estonian judicial area and thus before amending the act it is important to analyse the infringement of the Constitution as well as subsequent consequences.