Scandinavian Banks in the Eastern Baltics are Like Russian Money Laundering – or how the Class of Russia ‘Made a Fortune in all Ways’ is Integrated into the West

The first reports about money laundering struck like a bolt from the blue in 2017 when the Centre of Investigation Journalism ‘Organized Crime and Corruption Reporting Project‘ (OCCRP) and its partners conducted an investigat…

The first reports about money laundering struck like a bolt from the blue in 2017 when the Centre of Investigation Journalism ‘Organized Crime and Corruption Reporting Project‘ (OCCRP) and its partners conducted an investigation and revealed dirty money that were deposited in bank accounts opened in Estonia. It turned out that the biggest bank ‘Danske Bank’ established in Copenhagen in   1871 and that is important not only in the Northern Europe (operates in 14 countries) was involved in this. According to calculations made by OCCRP, questionable transactions amounting to 1.5 billion US dollars were carried out in Estonia (by the way, ‘only’ 77 million in Lithuania). According to the analysis of the Estonian daily newspaper Postimees, majority of money came from two main banks used for money laundering, i.e. Moldavian bank ‘Moldinconbank’ and Latvian  bank ‘Trasta Komercbanka’ that were going to Estonia between January 2013 and May 2014. At first the amounts were not big, later they reached up to 25 million per day. By the way, Estonian Financial Supervision Authority initiated the investigation of operations in the Estonian branch of ‘Danske bank’ already in 2014.    
In November 2018 Howard Wilkinson, a former employee of ‘Danske bank’, who gave evidence to the Committee of the European Parliament in November 2018 and to a special committee in the Danish Parliament a little bit earlier told that dirty money was laundered not only through Estonia, branches in Lithuania and Denmark were also involved in these operations; the money used to arrive from several banks in Russia. The scandal had direct impact on eight states of the European Union (EU) and America. 230 billion Euros could be laundered through the Estonian branch during 2007-2015 and several criminal investigations were initiated in regards to it. Bill Browder, the founder and investor of Hermitage Capital Management (we wrote about his activities in the article ‘Magnitsky List’ and ‘Contribution of the Balts to Transparency in the Current Geopolitical Havoc’ on voras.online/naujienos/magnitskio-sarasas-ir-baltu-indelis-i-skaidruma-dabartineje-geopolitineje-sumaistyje/) told the Danish Parliament that he will publish new information  relating to money laundering in ‘Danske bank’ when in March the Finnish broadcasting company YLE based on the leaked documents that cover 2005-2017 announced that the biggest Nordic bank ‘Nordea Bank Abp’ allegedly handled about 700 million Euros of dirty money, part of which was relating to the death of Russian lawyer Sergei Magnets, who was investigating 230 million US dollar tax fraud.
In summer 2018 B. Browder contacted the Estonian Prosecutor’s Office with a statement that the Estonian branch was one of the main channels of drawing money stolen from the Russian budget. According to the newspaper Postimees he also asked to check questionable bank transfers and accounts relating to ‘Danske Bank’ and the Lithuanian ‘Ukio’ bank (that is liquidated now). Already on 2 April of the current year the investor handed a statement to the Estonian Prosecutor’s Office and the Anti-Money Laundering Agency about probable scheming of Russian and former Soviet Republics origin in the Estonian branch of ‘Swedbank’.
Estonian police arrested 10 former employees of ‘Danske Bank’. The US Department of Justice, the Securities and Exchange Commission and several procurators of the states of the EU initiated the investigation. The bank itself in its report indicated that it considers 42 people and over 6,200 clients’ bank accounts are suspects. The shares of the Bank dropped by 47 percent in 2017 and the loss reached almost 18 million US dollars. Estonia asked ‘Danske’ to withdraw from the country and in reply to this the Bank informed that he was leaving from all Baltic states and Russia.
In spring of the same year similar situation started with the biggest bank of Sweden ‘Swedbank’ due to the same reason – money laundering of the eastern origin. ‘Swedbank’ has made high risk transactions for 155 billion US dollars. After charges were published the Bank lost about 5 billion in shares or one fifth of the market value. Shareholders of ‘Swedbank’ fired Brigitte Bonnesen, Executive Officer, after charges were brought for money laundering in Latvia, Lithuania and particularly in Tallinn. They were not happy about actions of the Executive Officer after the story gained a tremendous reverberation – at first the Executive Officer denied the link of ‘Swedbank’ with the scandal in ‘Danske Bank’, then she had to admit in public that the link existed. This story became the reason for debates in the Parliament of Sweden about reputational damage, because usually Scandinavian banks have been considered as the sample of reliability and transparency.  
The Swedish bank ‘SEB’ got into a similar trouble after reports this year in Swedish media telling about 50 million US dollars transferred via ‘SEB’ could be related to the tax fraud in Russia. In 2006 ‘SEB’ received a warning from Andrei Kozlov, Vice Chairman of the Central Bank of Russia, who was visiting Estonia that money launders systematically use the Baltic region as the channel in order to direct funds of doubtful origin towards the West. Shortly after his visit in Estonia, A. Kozlov was shot dead. ‘SEB’ and ‘Swedbank’ are located in Stockholm and both are dominating in the market of Baltic banking.
Finally, news about dead Aivar Rehe, former Chief Executive Officer of the Estonian branch of ‘Danske Bank” in 2007-2015, who was found in the forest not far from his suburban house, crowned this mess. According to the Estonian Prosecutor’s Office, A. Rehe was not a suspected person but a witness in the investigation regarding money laundering. Madis Üürike, the former Minister of Finance of Estonia, told in regards to this that he had met bankers from all over Europe, who admitted that all of them were doing things until 2015 that conflicted with the applicable regulations.     
As Marek Vahing, state prosecutor of Estonia indicated to the Danish media company ‘Berglinske’, money in the money laundering ‘machine’ were transferred here and there with involvement of a lot of companies-mediators and the process was controlled by professional shadow ‘cardinals”. This scheme allowed Russians, also criminals, to get to the best-quoted creditors in the world via the region that is close and familiar in the geographic point of view.  
Igor Putin, a cousin of the President of Russia, who was charged with money laundering, as a result of which Lars Morch, a member of the Bank Board of ‘Danske Bank’ in charge of transactions in the Baltic states resigned on 6 April 2018. According to an unnamed informer, I. Putin, a member of the Board of Directors of the bankrupt Russian bank ‘Promsberbank’, was laundering money through the company ‘Lantana Trade’. In 2013 ‘Danske Bank’ closed its bank accounts as well as of other 20 companies that used to trade in big amounts. Swedish national TV channel STV on 20 November of the current year announced about the investigation in regards to a potential violation of sanctions against Russia by ‘Swedbank’, when one million 400 thousand US dollar credit was transferred from the Russian concern ‘Kalashnikov’ to the company ‘Kalashnikov USA’ registered in Florida (USA), the manufacturer of the Russian rifle. Sanctions have been applied against the Russian concern since 2014 and the company ‘Kalashnikov USA’ is allowed to operate with a condition that it will not get money from Russia.     
By the way, some more news about ‘Promsberbank’ not only in the context of the story of ‘Danske Bank’: ‘Süddeutsche Zeitung’ (28 of August) published a testimony of Boris Fomin, former Chairman of the Board of the Bank who is serving 6 year prison term in Russia, where he told that Aleksei Kulikov, one of the owners of the bank, has coordinated cooperation with ‘Deutsche Bank’ thanks to the management of the Moscow branch of the German bank, thus ‘Promsberbank’ became the reception point of illegal money that have been integrated to the global financial system through ‘Deutsche Bank’ in 20 years time. In 2012-2014 so-called mirror transactions were performed through its Moscow branch – Russian groups used to buy shares of Russian companies in roubles and then they used to sell them at London stock exchange in US dollars. Although they made loss in most cases, however they reached their goal – illegal money (about 10 billion US dollars) was laundered. This ‘practice’ is still the subject-matter of the investigation carried out by the US Securities and Stock Exchange Commission (SEC). ‘Deutsche Bank’ admitted this fact in 2017, however made no comments about B. Fomin’s statements.
Good standing in present active times is a hardly measured thing. In the context of the previously mentioned fighter against corruption – the late S. Magnitsky, we should accept a statement said by Ilya Shumov, Deputy Director of ‘Transparency International-Russia’ Centre of Anti-corruption Investigations and Initiatives about hypocrisy of the Western mediators. The Internet media company BuzzFeed in July 2018 described an ‘uncomfortable’ situation that Anders Åslund, representative of ‘Atlantic Council’ of the Washington analytical centre, has experienced. The Swedish economist, living in the USA, at the request of the Latvian Bank Consortium and for remuneration wrote and presented an article in a closed event of ‘Atlantic Council’, in which he evaluated Latvian banks long criticized for laundering of dirty Russian money as the ones that reached positive changes.    
Among the ones that asked for the publication was the Latvian Bank ‘ABVL’ that tried to open a branch in the United States, however it didn’t succeed, because the US Financial Crimes Enforcement Network of the Minister of Finance (FinCEN) considered it as having concerns about money laundering. In presentation of A.Åslund’s report not only the envoy in America was participating but also Aivis Ronis, a member of the Board of ‘ABLV’. The economist in his correspondence with BuzzFeed was explaining that he was cautious and avoided saying that Latvian banks have done enough in anti-money laundering. The Internet portal was keen to cite A.Åslund: ‘It seems that Latvia does not raise a question about its worries in regards to money laundering’. The economist ignored the question of BuzzFeed about the volume of remuneration.     
Right after Moscow’s aggression against Ukraine in 2018 a term ‘toxic Russia’ took a space in the international public domain – the phrase ‘toxic Russia’ in Google search system amounts in 45.600,000 links. Not only geopolitical reasons determine toxicity. Great seven (G-7) that was working in Moscow on 11-29 March 2019 created a mission of experts of the ‘Financial Action Task Force on Money Laundering’ (FATF) in its report published in December called Russia a source of money that was acquired through criminal acts, majority of which is being laundered abroad. Majority of criminal proceeds are gained from embezzlement of budget, corruption, fraud in the financial sector and drug trafficking.    
Once there is a possibility to make money, theoretically conservative professionals of the financial sector, take a chance willingly just by ignoring corporate and other ethics. Laundering of money that was acquired through criminal acts is an enormous industry. According to assessment of the United Nations Office on Drugs and Crime (UNODC), 2-3 percent of the global GDP is being ‘laundered’ every year, which corresponds to 1.6 to 4 trillion US dollars. This is the way how the respectable class of Russia that ‘made a fortune by all means’ is being integrated into the respectable West.    

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