Garantex Europe OÜ, a licensed Estonian crypto payment processor with close ties to Russia, has processed more than €5 billion per year. The Estonian Financial Intelligence Unit (FIU) investigated the company and identified serious and systematic KYAC/AML deficiencies. As a result, the FIU would have led to the revocation of the crypto license. However, Garantex Europe OÜ voluntarily surrendered its license.
Standing out with billions and Russian clients
The Estonian FIA started on-site inspection at Garantex Europe OÜ in December 2021. “In June 2021, when I became the Director of the Financial Intelligence Unit, I decided that the first task will be to quickly identify virtual currency service providers that are at higher risk, to start on-site inspections of them based on the risk. Garantex Europe OÜ clearly stood out from others because its annual transactions amounted to more than 5 billion euros, and a large part of the business and customers were related to Russia and other high-risk countries,” said Matis Mäeker, Director of the Financial Intelligence Unit.
Not properly verified clients
The FIU said that more than 90% of the company’s clients have not properly verified their identity. For example, some of the customers presented to the Financial Intelligence Unit as natural persons were legal persons providing services to other customers. Several of them had a turnover ranging from about twenty million to a hundred million euros.
The FIU investigations revealed weaknesses on the part of Garantex Europe in several critical aspects of preventing money laundering and terrorist financing. Risk management measures were inadequate in terms of staff shortage and internal control, and both the risk appetite document and internal rules of procedure were insufficient.
A significant deficiency was that Garantex Europe failed to systemically and systematically notify the FIU of suspicious transactions concerning money laundering or terrorist financing. The FIU also found that fund processed via Garantex Europe was related to crime or wallets used by criminal offenders for illegal purposes.