Estonian parliament passes law on preventing financial fraud

Estonia's parliament, the Riigikogu, adopted a law on Wednesday, 21 October, aimed at making the prevention, detection and suppression of financial fraud more effective. Seventy-six members voted in favour. The law gives banks and payment service providers new powers against scammers, with the goal of reducing losses in the country.

What the law provides

Banks will be able to spot likely fraud before a payment is made and, if there is a risk, postpone it. A bank may also refuse to carry out a transaction if there are grounds to believe the money is most likely going to a fraudster. At present banks have no legal basis to suspend a payment, according to the Riigikogu press office.

Banks and payment institutions will also be allowed to exchange information about suspected fraud with other credit institutions, payment institutions and electronic money institutions. They may also share it with the Police and Border Guard Board (PPA) and with CERT-EE, the cyber incident handling unit of the Information System Authority (RIA).

During work on the bill, parliament added provisions allowing creditors, credit intermediaries and credit institutions to exchange data with one another when fraud is suspected. This is meant to help detect and investigate fraud connected with the granting of loans.

Why it matters

According to the parliament, the changes will let payment service providers step in faster when fraud is suspected and cooperate with each other, the PPA and the RIA. This should limit the damage caused by fraud and improve the security of the financial system.

Last year, Estonian residents lost around 29 million euros to scammers. Most fraud cases begin through telecommunications channels and end with a bank payment, so effective prevention requires cooperation between the state and the private sector. Information on various fraud schemes and cyber security advice is available on the Information System Authority's website.