Bankers May Have Moved $13 Billion Through Baltic Laundromat

Banks oper­at­ing in the Baltic nation of Estonia may have laun­dered con­sid­er­ably larg­er sums than first thought.

Estonian police now esti­mate that bankers in their coun­try were involved in sus­pi­cious trans­fers of mon­ey and secu­ri­ties, main­ly from Russia, total­ing more than $13 bil­lion from 2011 to 2016.

Danske Bank Rebuked by Government as Laundering Scandal Expands

The trans­ac­tions took place through four sep­a­rate schemes using non-res­i­dent accounts, includ­ing trans­fers of Russian stocks and bonds since 2012 worth more than 7.3 bil­lion euros ($8.6 bil­lion), Madis Reimand, the head of the police service’s Financial Intelligence Unit, said in a phone inter­view on Thursday. Accounts of U.K.-based com­pa­nies played “a sig­nif­i­cant role,” he said.

The Baltic region, which has long served as a con­duit for illic­it Russian funds into the European Union, has been taint­ed by a string of finan­cial scan­dals in recent years. Two of its banks were closed this year over mon­ey laun­der­ing, while Denmark’s finan­cial watch­dog has rep­ri­mand­ed Danske Bank A/S for vio­la­tions at its Estonian unit. In a bid to sal­vage their rep­u­ta­tions, Latvia and Estonia are con­sid­er­ing asset seizures and bans on the use of shell companies.

Reimand said there wasn’t enough evi­dence at this point to pur­sue crim­i­nal pros­e­cu­tion. In its annu­al report, released on Friday, the FIU says it’s “vital” to pro­ceed with the plan allow­ing the seizure of dubi­ous assets if their legal ori­gin can’t be proved, revers­ing the bur­den of proof.

Dubious Origin’

Our gen­er­al prob­lem with such trans­ac­tions from the East, and in gen­er­al with large inter­na­tion­al schemes, is that it’s impos­si­ble in prac­tice to find out to which pri­or crimes any assets of dubi­ous ori­gin are tied,” Reimand said. “Clearly these trans­ac­tions aren’t trans­par­ent and, there­fore, are suspicious.”

Three out of four schemes have already been report­ed by the Organized Crime and Corruption Reporting Project, which cit­ed an inves­ti­ga­tion by 17 European media orga­ni­za­tions. In two cas­es, Russian assets were main­ly trans­ferred through Moldova (known as the Russian Laundromat), with banks in Estonia han­dling about $2 bil­lion out of a total of $47 bil­lion, accord­ing to the Estonian FIU.

In the third scheme — the Azeri Laundromat – com­pa­nies and state insti­tu­tions there trans­ferred more than $3.9 bil­lion to non-res­i­dent cor­po­rate accounts at Estonian banks. A pre­vi­ous esti­mate by the OCCRP placed the fig­ure much low­er, at $2.9 bil­lion, Reimand said. Azerbaijan rejects the OCCRP’s report and Danske has declined to com­ment pend­ing the find­ings of an ongo­ing inves­ti­ga­tion into its Estonian unit.

Reduced Risks

The fourth scheme involved trans­fers of shares and bonds of Russian com­pa­nies to non-res­i­dent accounts at Estonian banks. The secu­ri­ties were sold through the local finan­cial sys­tem and pro­ceeds were paid to non-res­i­dents, before being for­ward­ed to “tens of coun­tries and thou­sands of com­pa­nies in exchange for dif­fer­ent goods and ser­vices,” Reimand said.

While OCCRP said all the sus­pect trans­ac­tions in the Azeri scheme were han­dled by the Estonian unit of Danske, Reimand declined to com­ment on spe­cif­ic banks. Still, he said the Estonian finan­cial watchdog’s actions in recent years have “vir­tu­al­ly” elim­i­nat­ed the risk of sim­i­lar schemes.

The finan­cial super­vi­sion author­i­ty has ade­quate­ly react­ed to reduce the risks that we were exposed to in these four schemes, and to a very large extent elim­i­nat­ed these risks from the mar­ket,” Reimand said. In all four cas­es, more than one bank oper­at­ing in Estonia was involved, he said.

Estonia’s watch­dog rep­ri­mand­ed Danske’s local unit in 2015 for “sig­nif­i­cant” mon­ey laun­der­ing breach­es, based on checks con­duct­ed a year ear­li­er. It is con­sid­er­ing open­ing anoth­er inves­ti­ga­tion into Danske after con­clud­ing the bank may have mis­led it by with­hold­ing infor­ma­tion about a client linked to Russian President Vladimir Putin’s cousin, Igor Putin, as well as peo­ple with close ties to Russia’s secu­ri­ty ser­vice, the watch­dog said this February.

The police report sug­gest­ed there’s every rea­son to expect mon­ey laun­der­ing efforts from Russia to con­tin­ue. In recent years, hun­dreds of banks there lost their licens­es amid crim­i­nal charges, and the peo­ple run­ning those insti­tu­tions are like­ly to keep try­ing to get their mon­ey out via Estonia.

(Adds ref­er­ence to police fore­cast on laun­der­ing in final paragraph.)

By Ott Ummelas

Bankers May Have Moved $13 Billion Through Baltic Laundromat

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