Estonia insists it is not Europe’s money-laundering hub

Pictured: the Estonian central bank's dedicated museum. [Tenreiro / Shutterstock]

In the wake of the Danske Bank scandal, Estonia’s central bank has had to clarify cross-border payments made over the past ten years, amounting to approximately €900 billion. EURACTIV France’s media partner La Tribune reports.

Aftershocks from a huge money-laundering scandal involving the local subsidiary of the largest Danish bank, Danske Bank, continue to hit Estonia.

But the small Baltic country is keen not to be seen as the new money-laundering capital of the world.

The Bank of Estonia, Eesti Pank, reacted strongly to reporting by Bloomberg, which said cross-border money flows amounted to over $1,000 billion (€900 billion) between 2008 and 2015.

Estonia admits over €1 trillion were laundered in the country in 2008-2017

Banks doing business in Estonia, which has been at the centre of a money-laundering scandal involving Danske Bank, handled more than $1 trillion in cross-border flows between 2008 and 2017, according to the country’s central bank.

Bloomberg also implied that the Danske Bank story (200 billion suspicious transactions) was just the tip of the iceberg, underlining that this amount, in relation to the country’s annual GDP of €23 billion, “raises serious questions about Estonia’s role in abetting Russian capital flight”.

Eesti Pank said that the reporting was “mistaken”.

“Bloomberg’s claim that these €900 billion are made up of non-resident flows is therefore misleading. The €900 billion do contain non-residents’ payments, but they only make up one part of the sum,” the bank said in a press release published on 3 October.

The statement also said that it does not provide separate data for residents’ and non-residents’ payments.

Eesti Pank also insisted that this figure is related to inflows and outflows from and to all countries, i.e. €442 billion into Estonia and €446 billion in the opposite direction. This included imports and exports, as well as financial transactions like purchases of securities.

“A cross-border payment is made when an Estonian entrepreneur sells milk to Lithuania or an electronics company moves money from Sweden to Estonia,” the bank specified.

French comparisons

The Estonian institution raised the matter again in a second press release on 5 October, when it again tried to set the record straight.

“The values of international payments initiated in Estonian banks in 2008-2015 was 3.1 times the GDP of Estonia, which is a similar ratio to those of Belgium, France and Finland, and behind that of Germany for example,” the central bank stated.

It added that the value of international transactions per capita was “substantially below the European average”.

[Credit: Eesti Pank/ ECB]

But the bank’s clarifications will probably not quell all doubts. “This is a surprising figure. This indicates that the Danske case is not a one-off affair and that the problem is related to other banks as well,” said Jakob Dedenroth Bernhoft, a Copenhagen-based expert on money laundering cited by Reuters.

In September, the largest Danish bank announced that it had recorded “suspicious” transactions totalling over €200 billion through its Estonian subsidiary between 2007 and 2015.

Latvia: the eurozone thriller

The investigation into the governor of the central bank of Latvia has put the last country to have entered the Eurozone under the spotlight. EURACTIV carries out a four-part investigation into the Switzerland of the Baltic states.

On 4 October, Danske Bank announced in a press release that it had received “requests for information from the US Department of Justice [DOJ] in connection with a criminal investigation relating to the bank’s Estonian branch conducted by the DOJ”, while it is already under investigation in Estonia, Denmark and the United Kingdom.

On the markets, Danske Bank continued to plummet after an investigation by American courts was confirmed and new revelations by the Financial Times about “mirror trading” (duplicating transactions).

Its share price has lost more than 6%, having lost around 40% stock valuesince the beginning of the year.

 

Further Reading

EU admits anti-money laundering rules inefficient, prepares for improved supervision

As recent scandals proved that the new anti-money legislation falls short of monitoring financial flows, the EU is leaning toward stepping up the supervision and enforcement of its rules.

Money laundering accusations in Latvia cast doubt on ECB credibility

The Governor of the Latvian Central Bank, suspended by the Parliament, continues to face extraordinary accusations. The Commission has promised to set up a working group by the summer to tackle money laundering. EURACTIV.fr reports.

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