By Dan Byrne
Foreign nationals using a virtual gateway to the Estonian economy are being linked to overseas crypto-currency frauds.
The Financial Intelligence Unit (FIU) of the Estonian Police said that some participants in the country’s e-residency scheme have been implicated in “a few large-scale exit scams,” involving blocking clients’ access to their funds, Bloomberg reported Monday.
E-residency was a launched by the Estonian government in 2014. It allows foreign nationals to virtually access vital components of the Estonian economy in order to do business there.
Company formation, banking, payment processing and taxation are all services which are available to participants, who frequently don’t have – or need – permission to physically enter the country.
In six years of running, it is estimated to have signed up more than 68,000 participants, resulting in the establishment of 13,000 new companies and the generation over €1 billion of economic activity.
Now, some e-residents and their associated firms are being linked to exit scams, as well as the organisation of “suspicious initial coin offerings, and the misappropriation of large sums within them,” the FIU said in a report last week.
Estonia’s reputation has suffered in recent times with news that billions have been laundered through the country with little done to stop it.
In particular, around €200 billion was estimated to have been laundered through the Estonian branch of Danske bank through the 2000s and 2010s.
E-residency managing director Ott Vatter has previously stressed the immunity of the system to fraud and tried to downplay the potential to use the corresponding digital IDs to further financial crime.
“You cannot launder money with a digital ID,” Vatter told ZDnet in 2019. “Furthermore, e-residency in its current form did not yet exist when the money-laundering cases happened.”
“To open a bank account, e-residents are treated as non-resident, and the banks have the same obligations in terms of compliance with KYC and AML rules,” he said.
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