Estonia warns of risks in wake of money laundering scandal

FRANKFURT, June 24 (Reuters) — Banks in Estonia have not yet plugged all the gaps in their mon­ey laun­der­ing con­trols, the Baltic state’s reg­u­la­tor told Reuters, pledg­ing to main­tain a clam­p­down in the coun­try at the cen­tre of one of Europe’s biggest finan­cial scandals.

Estonia’s efforts to tight­en mon­ey laun­der­ing con­trols at its banks fol­lows a scan­dal at Danske Bank which has been eject­ed from the coun­try after com­ing under inves­ti­ga­tion for 200 bil­lion euros ($228 bil­lion) of sus­pi­cious trans­ac­tions that flowed through its Estonian branch.

Kilvar Kessler, Estonia’s top bank super­vi­sor, said he had also con­clud­ed an inves­ti­ga­tion of mon­ey laun­der­ing con­trols at Swedbank, as well as mak­ing checks on oth­er lenders includ­ing SEB.

Kessler said his inves­ti­ga­tions had shown that, although there had been improve­ment in banks’ atti­tude to mon­ey laun­der­ing, there were “still weak­ness­es in the con­trol systems”.

Most of the risk is the past but some of the risk ele­ments are still there,” said Kessler, who heads finan­cial watch­dog, the Finantsinspektsioon. “We don’t want to see slop­py bank­ing here.”

His com­ments under­line the wide­spread scale of the prob­lem that affect­ed many banks in the Baltic state that had become a route for mon­ey leav­ing neigh­bour­ing Russia.

A Swedbank spokes­woman said it was “ful­ly coop­er­at­ing with the author­i­ties”. An SEB spokesman said it had an ongo­ing dia­logue with reg­u­la­tors and wel­comed any review of its Baltic business.

Last week, Swedbank, which is under inves­ti­ga­tion by U.S. author­i­ties, sus­pend­ed two exec­u­tives at its Estonian busi­ness. In April, it admit­ted to fail­ings in com­bat­ing mon­ey laundering.

Kessler said almost all banks in Estonia, which has a pop­u­la­tion of 1.3 mil­lion, had ear­li­er dealt with for­eign so-called “non-res­i­dent” cus­tomers, such as from Russia, but that this busi­ness had shrunk.

It is not pos­si­ble to do all the par­ties in the mar­ket at once,” he said, out­lin­ing his efforts to clean up the sec­tor. “There are a num­ber of them. We have our pri­or­i­ty list.”

The scan­dal has tar­nished the rep­u­ta­tion of the tiny state, which has mar­ket­ed itself as a dig­i­tal hub, offer­ing elec­tron­ic res­i­den­cy cards to for­eign­ers includ­ing Pope Francis.

The Danske case, which fol­lowed the sud­den clo­sure of ABLV bank in Baltic neigh­bour Latvia for mon­ey laun­der­ing dis­cov­ered by U.S. author­i­ties, prompt­ed calls to tight­en anti-mon­ey laun­der­ing rules.

Kessler appealed to bankers aware of wrong­do­ing to come forward.

He said bankers with a “dark con­science” should come clean. “If you have some­thing to hide, maybe you will be treat­ed in a milder way if you talk with us,” he said. “If not, wait for the law enforce­ment (to come) knock­ing at your door.”

Earlier this month, Estonia’s Corruption Crime Bureau of the Central Criminal Police said they had detained three employ­ees of Tallinn Business Bank, as part of an inves­ti­ga­tion into alleged mon­ey laun­der­ing and bribery.

Mati Ombler, who heads the Corruption Crime Bureau, said in a state­ment out­lin­ing the action that “ille­gal cash flows” were a threat to the coun­try’s reputation.

Igor Novikov, chair­man of Tallinn Business Bank’s man­age­ment board, told Reuters by email that the inves­ti­ga­tion was direct­ed at employ­ees and not the bank itself.

During (the) last 9–10 months, the num­ber of accounts of non-res­i­dents has been decreased very sub­stan­tial­ly,” Novikov said, refer­ring to for­eign cus­tomers. “Money laun­der­ing con­trols have been adjust­ed.” ($1 = 0.8778 euros) (Reporting By John O’Donnell. Editing by Jane Merriman)

By John O’Donnell

Original arti­cle: Mail online