Ground Zero for Europe’s Dirty-Money Scandal to Hasten Crackdown


(Bloomberg) -- The nation at the center of Europe’s $230 billion dirty-money scandal vowed to expedite a crackdown on shady transactions in a bid to repair its reputation.

Estonia hit the headlines last year after suspicious activity stemming largely from Russian clients and spanning almost a decade through 2015 was unearthed at the Tallinn branch of Danske Bank A/S. The fallout has since stretched across the continent, engulfing more major lenders and putting regulators under the spotlight.

With its credibility at stake and facing the threat that Nordic lenders may pull back, Estonia says it’s taking action. The Baltic member of the European Union and euro region wants to beef up fines for financial crimes to as much as 5 million euros ($5.6 million) and revive plans by the previous government to allow assets whose legitimate origins can’t be established to be frozen for up to a year.

Parliament is also about to tighten issuance rules for permits to crypto-asset companies.

“We now know the problems that must be prevented so that money-laundering crimes wouldn’t be so easy to commit,” Justice Minister Raivo Aeg said in an interview.

Estonian banks have already clamped down on money from non-resident clients and this year introduced measures banning dealings with shell companies. The government may also start levying fines for financial misdemeanors and plans to add money laundering to the list of crimes where investigations can include surveillance, according to Aeg.

Ground Zero for Europe’s Dirty-Money Scandal to Hasten Crackdown

The financial watchdog said this month that “most” banks are working to further reduce laundering risks.

Estonia’s steps are similar to several taken by neighboring Latvia, until recently another favorite conduit for illicit wealth from the former Soviet Union. That country’s No. 3 bank was closed down last year amid U.S. allegations it handled ill-gotten funds, while central bank Governor Ilmars Rimsevics is fighting bribery charges.

Under growing American pressure to do more, Latvia it is now proposing a more stringent approach.

The Danske case has sparked calls to create an EU body to tackle money laundering, operating “at arm’s length” from national authorities and countries. While the main responsibility for alleged misdeeds at the Danish lender lies with the parent bank, Estonian regulators and prosecutors lacked “a helicopter view” to properly address the issues, according to Aeg.

“We can say today that activities and reaction to these first signals weren’t put under the magnifying glass,” he said. “One must admit what’s been done wrong on the Estonian side and take measures to avoid it in future. But we can’t let Estonia be blamed for the work not done or outright misdeeds by other parties.”

©2019 Bloomberg L.P.

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