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International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 06:55

USD payments may become a problem for Estonian banks

BC, Tallinn, 22.03.2017.Print version
Following revelations in the media of alleged money laundering committed using Estonian banks, making U.S. dollar payments in Estonia and Latvia may become extremely difficult if Deutsche Bank should stop handling dollar settlements here, Aivar Paul, head of prevention of money laundering at LHV Pank, said LETA/BNS.

"Each piece of negative media coverage that entails as big amounts of money as this has a negative effect on the reputation of the Estonian financial system. We used to be part of the Soviet Union, we still have that history and they will continue to look at us this way," told Paul, adding that even without cases like this Estonia has to try harder than others because of its history.


"There are quite many banks in Estonia that have it very difficult finding correspondent banks that would offer U.S. dollars. Definitely this article doesn't make things better for them," Paul said, referring to the article published in the Tuesday edition of Postimees. 


"Speaking of LHV, we don't offer dollar settlements. Our problem is that we are an unknown small bank, we are not particularly attractive to the big banks commercially either," he said.

There is one major provider of correspondent relationship when it comes to the U.S. dollar in the Baltics, Deutsche Bank, and then a couple of smaller ones, Paul said. "Effectively, of the market for retail settlements, most of the settlements in dollars pass through one bank," Paul said, adding that he doesn't rule out Deutsche Bank leaving the markets of Estonia and Latvia.


Deutsche Bank was recently fined a quarter of a mln dollars, Paul said. The reason cited by the authorities was mirror trades involving funds channeled out of Russia and intentional actions of employees. But a closer look at the penalty resolution reveals that the main reason behind the fine was inability to monitor settlements in one's correspondent relationships, he said.


While there doesn't have to be a link between the fine for Deutsche Bank and the money laundering case made public on Monday night, there may be one, according to Paul. "All of that money that moved through here largely moved through these big banks in the same manner. Through correspondent relationships. Allegedly most of these payments were executed in dollars, which means that all of that money has moved through correspondent accounts at correspondent banks."


"I believe that for the head offices of the correspondent banks active in Estonia and Latvia this [large-scale money laundering] actually is not a big surprise. They have been aware of this situation effectively to a bigger or lesser extent at least," Paul said.


If Deutsche Bank discontinues handling of U.S. dollar settlements in Latvia and Estonia, such settlements would be available here only to clients of the foreign headquartered banks that have dollar settlements available at their headquarters.


"It will definitely not happen at the same price, it will definitely not happen as quickly, and I'm not ruling out that it will not be possible to conduct all transactions then," said the head of money laundering prevention at LHV Pank.


Postimees reported in its Tuesday edition that an international group of investigative journalists has revealed how banks laundered 20.8 bln U.S. dollars of Russian money of illegitimate origin, of this nearly 1.6 bln dollars through Estonia.


It said the three-year effort by the investigative journalism project Organized Crime and Corruption Reporting Project (OCCRP), which was assisted by Postimees, uncovered that banks in Estonia were used to pump vast amounts of money out of 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 bln U.S. dollars, of the funds moved through Estonia were transferred to the accounts of the Estonian branch of Danske bank, Postimees said.






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