Baltics AML: Where there’s no will, there won’t be a way

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No one is surprised by the money-laundering revelations from the Baltics.

European authorities are shocked – shocked! – to discover that money-laundering has been going on in the Baltic states

Which, of course, means they are not. The sheer scale of Danske Bank’s reported infringements in Estonia may have come as a surprise – the lender has admitted that most of the €200 billion of foreign flows that passed through its Tallinn operation between 2007 and 2015 could be classed as suspicious. 

The fact that some banks in Latvia and Estonia were acting as conduits for dirty money, however, has been an open secret for more than two decades. Bankers who worked in those countries say it was well-known which institutions were open to money-laundering, or indeed set up for it. 

Yet no action was taken. Even after compelling evidence emerged of the involvement of Latvian banks in the Magnitsky case, the Moldovan bank fraud and the Russian Laundromat, European bodies stayed on the sidelines. 

Finger-pointing

The money-laundering scandals that have rocked the Latvian banking sector and Danske this year, and made international headlines, were brought to light by US authorities and investigative journalists, not EU regulators or enforcement agencies. 

Now that they have been made public, European officials have been hastily searching for both a solution and an explanation. 

The latter has been easier to come by – indeed, the disclosures have inspired a spirited round of finger-pointing. Some have blamed the auditors who signed off on the results of deeply dodgy banks. Some have taken aim at the national authorities in Latvia, Estonia and Denmark. 

Others have preferred to eschew the search for a scapegoat in favour of highlighting the complexity of anti-money laundering (AML) activities and the difficulty of coordinating operations across diverse EU jurisdictions. 


It has already emerged that Danish authorities happily passed the buck on Danske back and forth with their Estonian counterparts for years 

This in turn has prompted belated calls from regional politicians and the ECB – which has been at pains to remind the public that it has no remit to combat money-laundering – for deeper cooperation between European states and the creation of a dedicated EU AML body. 

The multibillion-dollar question is whether or not any such moves will be more effective than previous attempts to curb money-laundering in the EU – if, indeed, they materialize.

The initial signs are not encouraging. A preliminary action plan prepared for the European Commission in August ran through an admirable list of recommendations, including giving more powers to the EBA and the creation of a new supervisory body – but without setting a timeframe for actioning them.

Worrying signs

Also, while attention has been largely focused on the short-comings of the peripheral EU states that have served as a nexus for money-laundering – which also include Cyprus and Malta – there have been worrying signs that more influential bloc members may be reluctant to take action.

It has already emerged that Danish authorities happily passed the buck on Danske back and forth with their Estonian counterparts for years. Similarly, officials in smaller states who have tried to take action against money-launderers report a lack of cooperation from some core European countries.

The EU will only find a way to get a grip on money-laundering by its banks when there is a will to do it. 

So far, that seems to be lacking.