TALLINN - An international group of investigative journalists has revealed how banks laundered 20.8 billion U.S. dollars of Russian money of illegitimate origin, of this nearly 1.6 billion dollars through Estonia, Postimees reported.
The three-year effort by the investigative journalism project OCCRP, which was assisted by Postimees, uncovered that banks in Estonia were used to move criminal funds from Russia as part of a scheme titled "Laundromat."
A document leaked to the team investigating the money laundering scheme lists tens of thousands of companies and reveals how Estonian accounts of little-known offshore companies were used to move sums that equal a sixth of country's state budget.
The lion's share, 1.18 billion U.S. dollars, of the funds, moved through Estonia were transferred to the accounts of the Estonian branch of Danske bank. Information from the money laundering information bureau suggests sums quickly moved out of Estonia again. The bureau and the financial supervision authority could do little else but emphasize the need for more stringent anti-money laundering measures.
Transfers that came primarily from banks in Latvia and Moldova started in the summer of 2011 and intensified in January 2013. Transfers ended in the spring of 2014. The financial supervision authority brought a control action against Danske in 2015 concerning compliance with measures of anti-money laundering and terrorist financing prevention.
"The bank did not give effect to anti-money laundering rules, violated client identification requirements, nor monitored the legality of clients' activities. I dare say violations were extensive and systematic and took place over a long time," head of the watchdog Kilvar Kessler told Postimees.
A month after the control action, Danske announced its Estonian CEO Aivar Rehe would be leaving. Rehe maintains that his departure has nothing to do with the money laundering case.
The current chief executive the Estonian operation of Danske, Ivar Pae, said the bank's Estonian branch had insufficient anti-money laundering measures and monitoring system in the past, including problems with the "know your client" principle. Pae added that by now the bank has thoroughly cleansed its portfolios in Estonia and exited the business of serving non-residents.
"We have changed our organization and management, introduced more stringent control, trained employees, developed IT systems, and boosted resources," Pae said.
"Laundromat" was first brought to the attention of the public by the Russian investigative journalism flagship Novaya Gazeta in 2014 when it was revealed that 20.8 billion U.S. dollars of money of criminal origin moved out of the country via clandestine bank accounts. Journalists found out how the money first moved to 112 East European banks and from there on to countries all over the world. The journalists tracing the funds arrived at the conclusion that the funds largely ended up in the hands of Russian businessmen owning construction, engineering, IT and banking businesses who are closely linked to the authorities of Russia.
The same case has been dealt with for years by investigators in Moldova, Latvia, the UK, and Russia, but attempts to bring the people responsible for it to justice have failed because of opposition from Russian officials, Postimees said.