Supreme Court of Estonia on applying AML/CFT due diligence measures


Hetti Lump

Partner and Head of Banking and Finance at KPMG Law

It is not a secret that Estonia has struggled with money laundering scandals. Unfortunately, this has also led to many practical complications for both financial institutions as well as their clients. Consequently, financial institutions have started to apply AML/CFT due diligence measures more rigorously than before (sometimes even more rigorously than required by the law) and their clients are struggling with complying with voluminous information requests received from financial institution upon opening and maintaining payment accounts and using other financial services.

Yesterday (on 13.05.2020), the Supreme Court of Estonia made a decision whereby it concluded that a credit institution has a right and an obligation to extraordinarily terminate a business relationship (e.g. a long-term credit agreement) if the client refuses to provide information and documents that are necessary for the application of AML/CFT due diligence measures to eliminate a suspicion of money laundering or otherwise. The Supreme Court highlighted that the principle remains the same even if the circumstances underlying the suspicion existed before establishment of the business relationship and, it does not make a difference that the credit institution had an opportunity to request the information from the client before establishing a business relationship.

Unfortunately the Supreme Court did not address the issue that some information requests might be unfounded or go (a bit) too far (something that many clients have pointed out). It has only addressed the facts of the specific case without setting a principle on this matter.

Therefore, let’s hope all relevant parties remain reasonable. Financial institutions place information requests to their clients intelligently and do not unfoundedly rely of the obligation to apply AML/CFT due diligence measures upon terminating long-standing business relationships with their clients. Likewise, the clients also understand the necessity to apply AML/CFT due diligence measures and remain patient upon complying with reasonable information requests received from financial institutions. In sincerely hope that the solution is in intelligent and mutually considerate cooperation.

The Supreme Court decision (in Estonian):

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