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Estonian AML pilot shows what’s possible when tackling FinCrime

Estonian AML pilot shows what’s possible when tackling FinCrime

An AML pilot which saw ten Estonian banks take part in a country-wide initiative to tackle financial crime has been lauded as a success by participating banks, preventing up to €3 million from reaching criminal-controlled accounts.

Titled ‘AML Bridge,’ the pilot is the brainchild of Salv, an Estonian regtech founded by former Wise and Skype employees, with the objective of helping financial institutions fight financial crime more effectively through a secure FinCrime intelligence sharing platform.

The platform was fully supported by Estonia’s Financial Supervision and Resolution Authority (FSA), Data Protection Inspectorate (DPI), and Financial Intelligence Unit (FIO).

The participating banks included Swedbank, SEB, Luminor, LHV, Bigbank, Citadele, OP Bank, Coop, TBB, and Inbank. During the pilot, banks saw AML and fraud cases being resolved in as little as three minutes, with an average resolution rate of 15 minutes.

According to Andres Kitter, head of LHV UK: "Salv's AML Bridge significantly improved the exchange of information between the banks and helped us quickly stop many fraud and money laundering attempts. Now, LHV and other banks that participated in the pilot are discussing options to include more financial and non-financial institutions; and even the Financial Intelligence Unit, an Estonian regulator.”

In a press release on the pilot’s findings, Olavi Lepp, CEO of Swedbank Estonia, commented: “Banks know what the problems are and Salv worked out how to really solve them. The AML Bridge tool is not just useful to stop money laundering and terrorist financing; it’s also been useful in fraud prevention.”

The banks were required to share FinCrime data through the platform, which saw over 1200 collaborative investigations between July 2021 and February 2022, undertaken across three use cases: AML, fraud, and sanctions. Salv has seen use cases for sanctions more than double in recent weeks.

Additionally, network benefits were experienced across participating institutions across institution size, and smaller members were even seen to bring network benefits to market leading banks. In one case, a member bank which received a single inquiry from the latest network joiner gave them a two-day headstart into a fraud wave - ultimately leading to customer savings estimated at €80,000.

Kitter adds that while the collaborative investigations between banks that use the AML Bridge don't shift the bank's KYC responsibilities, the fast and secure encrypted exchange of information via Salv's platform “significantly improved the EDD (enhanced due diligence) quality.”

Why the Ukraine crisis underscores the need for robust AML solutions

Given the heavy financial sanctions placed on Russia and specific Russian individuals, the push to target dirty money and cut-off access to sanctioned individuals has never been more fervent.

Commenting on the importance of finding tools to truly put sanctions to their full effect, Taavi Tamkivi, co-founder and CEO of Salv, states: "The role that sanctions play fundamentally changed when Russia invaded Ukraine. For many, sanctions have been an obligation to stay compliant, and it has sometimes been hard for companies to see the real impact of the sanctions. This mindset has clearly shifted.”

“We see it from our already existing AML platform customers, who we are helping with sanctions screening, but it is also clearly visible that the interest from new companies, also non-regulated ones, has increased in the coming weeks. This is not only due to their compliance duty - everyone wants to have an impact and do more to help end this war.”

Tamkivi says that Salv has seen the sanctions related cases almost triple on the AML Bridge, meaning that the banks that are part of the AML Bridge are using the network intelligence to resolve their sanctions-related cases faster and prevent suspicious money moving further.

“We witness that banks want to do more than the bare minimum required by law and use the AML crime fighters community to oversee the sanctioned entities and people better. We are working with banks and other stakeholders in the industry to see what more Salv can do to step up the sanctions screening and have a tangible impact on stopping the funds that may support the war effort through the financial system.”

Where to next?

AML Bridge has progressed most in the Baltics and the UK, but work is underway to expand to Poland, Sweden, and Germany in H1 of 2022.

“It takes time to build a countrywide Bridge like we did in Estonia and get the various stakeholders from banking, regulators and data privacy on board. In addition to the countrywide solution, Bridge is also expanding organically through the Estonian network.”

Expansion is happening in different “streams” already, explains Tamkivi. If an Estonian bank or fintech wants to include their Lithuanian or German fintech counterpart into their network to start sharing relevant intelligence, this doesn't require a full countrywide solution and can be implemented on a case by case basis.

Salv is in discussions with tech-minded financial hubs such as Singapore, as well as countries including UAE, Mauritius, and other regional finance hubs which are hoping to improve their fight against financial crime.

Tamkivi explains that global regulators have also been interested to learn about Salv's Estonian experience.

Salv and the Estonian AML Bridge stakeholders have been part of the latest Financial Action Task Force (FATF) study, and their experience of the AML Bridge will be included in the FATF Stocktake on Data Pooling and Collaborative Analytics. “This experience sharing will help FATF to pull together their upcoming new recommendations on industry wide collaboration and intelligence sharing,” comments Tamkivi.

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