New Delhi: Estonia’s decision to offer e-residency and easy investment opportunities — including to Indians — under its e-Residency programme has invited fresh international ire, as the Baltic country is at the heart of a recent $230 billion money laundering scam.
Last year, the suspicious movement of funds worth $230 billion was tracked down to the Estonian branch of Danske Bank, Denmark’s largest bank.
A Reuters report said that the scam was “rooted in old school subterfuge – offshore shell companies were used to disguise where the money was coming from”. But it also said that “Estonia’s population of e-residents, some of whom bank in the country even though they live abroad, potentially offers a high-tech route for suspect funds”.
Among the prominent Indians who are already e-residents in Estonia are Reliance Industries chief Mukesh Ambani and Minister of Information Technology Ravi Shankar Prasad. While Ambani has set up a research centre for his tech firm Reliance Jio in Estonia, Prasad was granted the e-Citizenship card as a gift during his official visit to the country in 2016.
E-residency for Indians: Tax haven or easy business?
The e-Residency programme and Estonia’s massive push for a digital society has come under fire internationally amid growing concern over the country’s capability to safeguard itself from massive money laundering scams and becoming a tax haven.
However, the country’s Ambassador to India, Riho Kruuv, assured adequate safeguards.
“We will strictly follow the rules and regulations that are in place at the level of European Union as well as those that are there internationally. Digital gives you lot of freedom but it also gives lot of transparency and visibility. We will also make sure that the technology helps us to fight tax evasion and other such things. We will do a proper background check,” Kruuv told ThePrint.
“Estonia is not a cash economy. We are all digital. In that sense, it is very difficult to hide. There is always a chance that some people may try to misuse the system but we work on the basis of probabilities, we do background checks when they apply for a card and then their business proposals are also checked,” he added.
Kruuv admitted that while the system is not very sophisticated, Estonia follows international laws that leave no room for mishap.
“I am sure in the future there will be some questions on the table with regard to Estonia being a tax haven. But I can tell you this e-Residency programme has never been seen as a source for money laundering. It gives an opportunity to individuals to lead a digital nomad lifestyle and economic freedom,” he said.
India and Estonia also have a Double Taxation Avoidance Agreement (DTAA) to avoid incidents of double taxation on a single income.
As many as 2,300 Indian nationals have been granted the e-Residency card, of which 307 have set up businesses in Estonia across various sectors, Kruuv said.
Recently, the country’s financial regulator — Finantsinspektsioon — has also expressed concern over the e-Residency programme and warned against becoming vulnerable to illegally sourced money.
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Easy access to Estonia and EU markets
The e-residency programme launched in December 2014 is aimed at encouraging digital entrepreneurs around the world to use the card to gain easy and faster access to Estonia and as a gateway to enter the European and Russian markets.
“You can open a company in Estonia in 18 minutes while sitting in New Delhi or Andaman islands over the Internet. And if you have opened a business in Estonia you have opened a business in Europe … Being close to Russia, especially St. Petersburg, you can access that market too,” the Ambassador said.
Under this, an individual can apply for an e-Residency digital card at a cost of 100 euros by registering on the website. The card can be collected from the Embassy of Estonia in a few days.
It becomes an individual’s identity to set up a business establishment in Estonia. This, however, does not mean that the individual can own a physical residence in the Baltic country that boasts of a population of 1.3 million.
This report has been updated to indicate that there was no initial investigation linking the Danske Bank scam to the e-residency programme. Ambassador Kruuv’s comment on using technology to fight tax evasion has also been corrected. The errors are regretted.