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IBAN discrimination: misinformation and censorship from Estonian e-residency team
The Estonian e-residency team has published a text against IBAN discrimination (IBAN discrimination is when a European administration or company doesn't accept a bank account number – IBAN – because it's from another country), a real problem for a lot of e-residents. But this text is just marketing, not to say misleading. We fully support the “fintechs” (as Transferwise, Revolut…) and other who try to fight IBAN discrimination, but that has not been not the case of the Estonian e-residency team. We will share below an e-resident point of view who faced IBAN discrimination already 5 years ago, plus we'll bring the right legal information and right contacts on this topic (provided to some e-residency people before they publish their text, but ignored and censored).
CONFIDENTIAL REPORT - E-resident company: How to open a bank account in Estonia (and how to keep it)
How to locally hack the IBAN discrimination for e-residents
According to e-residency people the IBAN discrimination is a problem for European commission (it's wrong, they're the problem themselves, we'll see later, but let's do as if they were right): it's possible to “hack” locally the problem to end the consequences of IBAN discrimination in Estonia. Hacking is an Estonian way of thinking, it was in the root of e-residency, it's still in projects as AccelerateEstonia, a lot of startups, etc. Unfortunately the e-residency team lost its spirit when all the geeks left: it's now just a marketing machine.
Here 3 possible ways to hack the IBAN discrimination by providing all e-residents an EE IBAN (IBAN starting with EE, meaning in Estonia):
1) when an (e-)resident is denied bank account by all banks, the Bank of Estonia should decide which local bank must open a basic bank account (there is such a law in France, it works). OR
2) Estonia could setup a public institution providing directly to e-resident an EE IBAN with the most basic services (even as simple as a redirection to another IBAN). This way was used in France (“tax office” was the bank account). We remind the e-residents have background check by the local police. OR
3) several fintechs requested EE IBAN to work with e-residents (they told us!), but Estonian banks don't want to share their EE IBAN. So Bank of Estonia could issue new batchs of EE IBAN for this fintechs.
Of course, if one of these solutions was adopted it would mean less clients for LHV, the partner bank of e-residency. That's probably why e-residency team is not pushing these solutions. E-residency team is a public agency, but it only promotes the private LHV (and sometimes Swedbank). And e-residency team is no help when an e-residents who really need a EE IBAN get rejected by LHV. A public agency should also inform (not only doing marketing), provide the full official list of banks in Estonia provided by the Financial inspection (around 10 of them) as a plan B. For 6 years E-residency has been behaving as a private company, not enough independent to publish this official full bank list. Despite of what e-residency team claims, e-residents got approved by the other Estonian banks too.
Official list of banks in Estonia
IBAN discrimination is a local problem in Estonia
IBAN discrimination has two sides: problem to get money “out” or problem to get money “into” the bank account. Let's start with the 1st case and one example:
Our e-resident company had luckily an EE IBAN, but we faced IBAN discrimination anyway: our Estonian bank blocked “cross border direct debits” from an IBAN account that was not starting by EE. That was a big problem for us because it was the tax office of another country who wanted to get money this way by its law (so everything was official, not a scam that the Estonian bank wanted to protect me from…). Estonian banks are not complying to the European law. Estonian authorities should warn or punish Estonian banks. This is 100% a local problem in Estonia. We told to e-residency team 5 years ago about this problem, they did nothing to help, they didn't tell us who to contact. We had to pay 500 euros a travel to the other country and to find a manual solution with the foreign tax office. We'd like to avoid other e-residents to live the same.
In other EU countries (France, Ireland…), the authorities publish information against IBAN discrimination and they provide a local contact where consumers can send alerts, then the authorities warn or punish the companies who don't comply to the law. We've got nothing like this from the e-residency team, even no link to any Estonian web page on this topic for locals. E-residency team, a governmental agency, has only published a text on Medium to say the trouble should be fixed by European commission. They send us to the wrong direction on purpose, because the facts are fully opposite: there is a European “law” (Single Euro Payments Area/SEPA regulation) that all EU countries should enforce on their ground, that's how things work in Europe. There is even a decision by European court of justice. It seems Estonia is not enforcing it. Why? We don't know. But European commission has been told that some countries are not enforcing and we're waiting for its answer (it will be long…) - usually uncooperative countries get a fine (it would mean the victims, us, tax payers, would pay the fine for being victims).
SEPA regulation (EU) No 260/2012
European court of justice, decision against IBAN discrimination
Parliamentary questions to European commission about countries who permit this illegal practice
How to fight the IBAN discrimination for e-residents on an international level
2nd case is when a company/bank doesn't want to work with you because you have no EE IBAN in Estonia.
E-residents are from Africa, South-America, Asia… They're not familiar with European union system, they don't know where to file a claim, they think they need a lawyer, that it's expensive, etc. In fact just one letter to tell their story to the right office is enough. But Estonian e-residency could be more help and provide a list of the local authorities where to send this letter. They could even be more help by sending themselves too a letter to these authorities, as from a governmental agency the case would seem more serious than if only letter from a small entrepreneur in Africa/etc. The Estonian e-residency team doesn't want to do anything of that, it prefers to do marketing wind saying the problem is European commission… (while on opposite Estonia could be punished by European commission for not enforcing the law, see previous part).
The IBAN discrimination problems of Estonian e-residents are mainly with few companies: Apple, Google, Paypal… For Google and Apple for example, the authority is the Irish one. Luckily this authority is fighting IBAN discrimination, so we gave its contact to the e-residency team. From what we know, the e-residency team has never contacted the Irish authority. Same kind of letter could be sent to Luxembourg where Paypal is.
EU countries are fighting IBAN discrimination on a large scale, examples: Ireland, France…
Official list of authorities in all EU states members against IBAN discrimination where customers can report
For Estonia, two authorities are fighting IBAN discrimination: Financial inspection and Customer protection board
What is happening in the Estonian e-residency team?
Why Estonian e-residency team is spreading a wrong information about IBAN discrimination? One explanation could be this information comes from members of the team who are not from Estonia, even not from European union and who don't understand how this country and the European union work. We would expect Estonian people of the e-residency team to fix this wrong information, but that's not the case. Maybe these Estonian members are not familiar either with this topic? Anyway we've sent the right information to Estonian e-residency team. But they didn't care, they didn't want to fix their wrong information. Worse: the right information has been censored from the official Facebook group and the sender of the fix has been banned for trying to publish it (a moderator invented publicly a fake quoted sentence, a personal attack that was never wrote/told, to substantiate the ban). In fact, for years, several information have been censored in this Facebook group the same way. For example one “how-to” with already links to the Estonian Customer protection board website and other official Estonian governmental websites, the moderator (again not Estonian) claiming publicly it is… “spam”!
There seems no logical reason to explain this censorship, why it's not possible to share a fix and at least to debate. In fact this censorship (done by someone not Estonian) is simply opposite to the Estonian values (the country fought so much to get back freedom of speech canceled by the Soviets).
But we have a theory on these events as we know people of the Estonian e-residency team and backstage. We wish Estonia, all e-residents, e-residency team and its new director a common success. And most members of the Estonian e-residency team have this same goal, we know. But maybe someone has not the same anymore: someone who wanted to be the new director (with support of few colleagues) and who is disappointed that he was not selected few months ago. Someone who could get a new chance to become quickly the next director if the program does not improve.
The ground floor was already slippery for the previous director who was not the director long time…
CONFIDENTIAL REPORT - E-resident company: How to open a bank account in Estonia (and how to keep it)
Read also:
FAQ and tips for Estonian e-residents
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