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FCPA and UK Anti-Money Laundering Act Compliance in Estonia

FCPA and UK Anti-Money Laundering Act Compliance in Estonia

Estonia
Typography

According to TRACE Matrix 2016 results, Estonia is the third least corruption prone country in the world, minimizing the risk of liability under anti-corruption regulations. To date, there is no case law under FCPA rules concerning Estonia. Nevertheless, the legal framework set by the FCPA gives rise to theoretical problems of definition which may hinder its enforcement.

The FCPA sets out liability for bribing a foreign official, providing United States courts with jurisdiction. Active bribery is also punishable under Estonian Penal Code (EPC) §6(1) by the principle of territorial jurisdiction – even (according to EPC § 7(2)(2)) if the bribe takes place outside of Estonia. In case of proceedings in the USA, however, a person making a bribe cannot also be held criminally liable in Estonia due to double jeopardy. The situation is different in those circumstances where the definitions of “foreign official” and “bribe” vary.

The scope of the FPCA is limited to giving a bribe to a public official. The EPC, on the other hand, has a wider scope of application, as it also covers bribes in the private sector. As a result, application of the former falls short and private sector corruption will be prosecuted under Estonian law. 

Secondly, the EPC provides for a broader interpretation of what can be considered a bribe than the FCPA. A bribe, according to EPC § 298, is a promise of property or other advantages – meaning that a bribe is an advantage, including property. Property according to § 66 of the General Part of the Civil Code Act, means a set of monetarily appraisable rights and obligations. Therefore, for example, if a US person gives a loan to an Estonian public official in exchange for an act made as part of his position, it may be considered a bribe – but contains an exception for facilitating or expediting payments to expedite or secure a routine governmental action. By contrast, such payments would be prosecuted under the EPC. Gifts to public officials are considered a defense under the FCPA. In Estonia, the value of a gift that does not breach corruption regulations is low. Case law regarding gifts and hospitality in terms of corruption is scarce.

Extradition of offenders to the US has encountered problems in practice. Provided that all formal conditions are met and a person is prosecuted in the USA, extradition of that person is regulated by the extradition treaty of 2006 between Estonia and the USA. This treaty does not impede extradition in bribery cases since the FCPA is less severe than the EPC: general principles of extradition are met under article 2(1) of the treaty, which states that an act must be punishable both in Estonia and the USA by at least a year of imprisonment and it must not be expired under the law of the requesting state according to article 6. Penalties under the FCPA are leaner than those of the EPC, which, where the elements of accepting a bribe exist (e.g., recurrence or large scale), allows punishments of up to ten years of imprisonment or, for legal persons, a monetary penalty of up to EUR 16 million. Parallel criminal proceedings must be avoided and should be solved by transfer of proceedings.

Anti-money laundering regulation in the UK does not differ from the Money Laundering and Terrorist Financing Prevention Act (MLTFP) in Estonia as both are based on and comply with the requirements in the fourth money laundering directive (2015/849/EU). The transposition date of the directive was June 26, 2017, however, MLTFP as the method of transposition is currently still in the draft stage (draft legislation no. 459 SE) in the parliament.

In the context of anti-corruption regulations and money laundering it should be noted that EPC § 83-2 allows an extended confiscation of assets in bribery and money laundering cases. Through extended confiscation the court may confiscate part or all the convicted person’s assets if the nature of the criminal offence, the difference between the legal income and financial situation, expenses, or lifestyle of the person, or another fact gives reason to presume that the person has acquired the assets through commission of a criminal offence. In this event, the burden of proof is reversed, meaning that the accused must prove that the assets do not derive from a criminal offence. At the same time, the FCPA provides for civil penalties up to USD 10,000 with the burden of proof on the state.

By Marko Kairjak, Partner, and Birgit Sisask, Associate, TGS Baltic

This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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