From Estonia, a collaborative approach to fighting money laundering

Salv, the anti-money laundering (AML) start-up that raised two million US dollars last year, is set to launch a pilot programme called AML Bridge in cooperation with four of Estonia’s largest banks. The pilot comes with cooperation from Estonia’s Financial Supervisory Authority, Financial Intelligence Unit, and Data Protection Inspectorate whose experts have been participating as consultants in the working groups. Results of the pilot will be announced in the spring of 2021.

The aim of the pilot is threefold. First, to prove that collaborative crime-fighting in the banking industry is the best way to fight money laundering. Secondly, to confirm that the Privacy Enhancing Technology (PET) enables safe, secure data sharing within the bounds of regulatory and data privacy laws in the European Union. Finally, if the pilot proves successful in Estonia, it should set a new AML standard for financial institutions across Europe to follow in Estonia’s footsteps.

Taavi Tamkivi, the founder and CEO of Salv, says that Estonian banks and regulators have an open-minded approach to challenging financial crime with intelligent technology.

“Today, it’s estimated that banks can prevent less than one per cent of illicit funds flowing through their system. The current system is unduly burdensome for honest customers who have nothing to do with money laundering and has nothing to do with banks’ hesitation to prevent money laundering. The core problem is inefficient tooling. Up until now, criminals have had the upper hand — because they can collaborate. Banks cannot. Achieving a new crime-fighting standard is a complex objective because of the need to respect privacy protection rights. A new standard can only be established in collaboration with forward-thinking banks and regulators. I hope that Estonian banks and regulators can forge paths for the rest of the world to follow,” he explains.

Tamkivi points out that criminals with a global reach cooperate and share best practices amongst each other. “They literally share laundered cash flows. In other words, they cooperate in legalising illegal income, and they consciously plan the most complex and hard-to-find networks. At the same time, due to regulatory challenges, banks work in silos without being able to quickly exchange information. Until now, there hasn’t been a technological solution that could make sense of data without violating a person’s right to privacy. The situation is further complicated in some countries when its people suspect senior government officials of collaborating with criminal network leaders. Criminals gain an advantage when given access to information on current preventive and blocking measures taken against financial crime. AML Bridge is a supplement, not a replacement, for AML tools financial institutions use today. Our technology offers banks a new tool that enables secure access to third party intelligence and, thus, greater collaboration in the fight against crime,” adds Tamkivi.

Tamkivi founded Salv – along with Jeff McClelland (COO), and Sergei Rumjantsev (CTO) having  previously built the AML, fraud, and know your customer teams at TransferWise and Skype. Investors include Fly Ventures, Passion Capital, Seedcamp, N26 founder Maximilian Tayenthal, former Twilio technology manager Ott Kaukver, and Estonian e-residency program initiator Taavi Kotka.

The AML Bridge pilot tests a similar solution to X-Road Estonia, the country’s e-platform where, instead of storing data in a centralised location, technology instead enables data to be kept in the hands of the originator and accessed securely from there. This ensures maximum immunity against cyber-attacks and robust personal data protection. AML Bridge will only allow a bank to access another bank’s intelligence if there’s a reasonable basis according to the Money Laundering and Terrorist Financing Prevention Act. Salv’s technology can create links between peer banks’ data and securely share AML intelligence to identify potentially severe risks. In this way, banks will be able to prevent illicit transactions and discrimination against honest customers. “We can rule out cases where a person is refused service because a criminal in another country has their same name,” says Tamkivi.

According to Erki Kilu, chairman of the board at the Estonian Banking Association, the pilot gives Estonia a unique opportunity to test intelligent collaborative solutions to make AML measures more effective. He believes those findings could be implemented outside Estonia.

“Today, the Estonian digital society is an example for other countries in the world. Estonia is seen as an opinion leader when it comes to e-government solutions, so perhaps Estonia could also become an opinion leader in the prevention of money laundering acts. The biggest challenge isn’t so much in the technology’s capabilities, but in how to conduct the pilot in full compliance with data privacy regulations,” Kilu says.

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