Estonian FIU: Money flows related to Russia, Belarus have decreased sharply

TALLINN – According to an analysis by Estonia's Financial Intelligence Unit (FIU), deposits of Russian and Belarusian persons in Estonia, cross-border payments and payments made with Estonian bank cards in Russia, as well as cash withdrawals made with Estonian bank cards in Russia decreased sharply during the first months of the Russian-Ukrainian war.

The turnover mediated by Estonian virtual currency service providers to Russian customers also decreased, the FIU said in a press release on Friday.

Since the beginning of the war, cross-border payments from Russia to Estonia decreased by 18 percent, falling to 92.6 million euros by May. Payments from Estonia to Russia meanwhile decreased by 40 percent to 72.9 million euros. According to the FIU, cross-border payments with Belarus are characterized by smaller volumes, volatility in volumes, and also a downward trend.

The war has also affected the flow of goods and cross-border payments by country. The volumes of payments have increased with the United Arab Emirates, Armenia, China, Turkey, Georgia and Uzbekistan, among others, or countries which, according to the United States financial intelligence agency FinCEN, may be used to evade the sanctions imposed on Russia and Belarus.

Toomas Plaado, head of the strategic analysis department at the Estonian FIU, said that reports submitted to the FIU, most of which have come from Estonian credit institutions, do not show a significant avoidance of sanctions through these countries.

"Rather, it is indicated by isolated anomalies in cross-border payments and in the import and export of goods," he said, adding that since trends can be ascertained only in the longer term, the FIU will keep a close eye on such transactions.

The volumes of large cross-border transactions by companies of Estonian e-residents were unchanged, speaking of data for April. However, the volumes of large cross-border payments and the amounts of transactions of several companies of Russian citizens engaged in the wholesale trade of motor fuels and electrical materials, and in the production of iron, steel and ferro-alloys increased severalfold.

The analysis also revealed that there have been no sudden changes in the share of Russian clients of Estonian licensed virtual currency service providers. The share of Russian customers in the 52 companies with virtual currency licenses serving Russian customers the most was approximately 12 percent. The nearly 80 percent drop in the turnover of services brokered to Russian customers in May to 3.7 million euros per week was mainly related to the business of one service provider.

Demand for cash in Estonia tripled in the first weeks of the war, but then returned to the pre-war level. The balance of deposits of Russian households and non-financial companies in Estonian credit institutions fell from 83 million euros in February to 53 million euros in June, while the corresponding figure for Belarusian individuals was down from 15 million euros in February to 3 million euros in June.

"The removal of cash from circulation perhaps is primarily related to people's desire to establish a crisis reserve. We also see an increase in the declared export of cash at the Estonian-Russian border, primarily for personal purposes, which rather does not constitute a deviation from the sanction at the moment," Plaado said.

The export of the currencies of the member states of the European Union to Russia for purposes other than personal purposes is prohibited by the financial sanction in force.

The survey is based on data from the FIU, the Financial Supervision Authority, the Police and Border Guard Board, the central bank and the Tax and Customs Board.