Estonia scraps key part of new anti-money laundering legislation

FILE PHOTO: Danske Bank sign is seen at the bank's Estonian branch in Tallinn, Estonia August 3, 2018. REUTERS/Ints Kalnins/File Photo

TALLINN (Reuters) - Estonia scrapped a key part of planned legislation to toughen its laws against money laundering, drafted in the wake of a scandal involving Denmark’s Danske Bank.

The proposed rule to force people suspected of benefiting from suspicious financial transactions to prove that their wealth came from legitimate sources was rejected by a parliamentary committee on Thursday because it was not specific enough.

Estonia has been under the regulatory spotlight after Danske Bank said last year that payments totaling 200 billion euros ($228 billion), many of which it described as “suspicious”, had been moved through its Estonian branch between 2007 and 2015.

Estonia still plans other new measures to combat money laundering, including increasing maximum penalties on financial institutions and giving more powers to the Financial Intelligence Unit.

However, the rule on disclosure of personal wealth had been strongly criticized by the Chancellor of Justice, the country’s legal ombudsman, as working against the basic legal principle of innocent until proven guilty.

“The current wording is not specific enough and of course, we do not want to create anxiety for honest people,” Jaanus Karilaid, the head of parliament’s Legal Affairs Committee, said in a statement after the committee removed the plan from the proposed legislation.

Karilaid said a re-worked version of the rule could still be included in the legislation after the first reading in parliament, which is due next week. Some independent lawyers, who did not wish to be identified, said they doubted it would be revived.

Under current law, it is up to prosecutors to show that a suspect’s wealth was illegally obtained, but the proposal would have put the burden of proof on the suspect.

In December Estonia arrested 10 former employees of the local branch of Danske Bank as part of an international investigation into the alleged money laundering.

Reporting by Tarmo Virki; Editing by Susan Fenton