Baltic States – CIS, Banks, Estonia, EU – Baltic States, Exchange, Financial Services, Latvia, Legislation
International Internet Magazine. Baltic States news & analytics
Friday, 29.03.2024, 06:55
USD payments may become a problem for Estonian banks
"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.