Banks in Estonia Handled $1 Trillion in Flows in 2008-2017 as Money-Laundering Scandal Widens

October 4, 2018 Updated: October 4, 2018

TALLINN, Estonia—Banks doing business in Estonia, which has been at the center of a money-laundering scandal involving Danske Bank, handled more than $1 trillion in cross-border transactions between 2008 and 2017, according to the country’s central bank.

The European Union member nation of 1.3 million people has been rocked by revelations that banks there laundered money from Russia, Moldova, and Azerbaijan via non-resident bank accounts. The scandal has forced lenders in Estonia and neighboring Latvia to shut.

The data on cross-border flows, first reported by Bloomberg, suggests that the scale of money laundering through the small Baltic country may have been larger than previously thought. The news sent Nordic banking shares sharply lower.

The central bank said that between 2008 and 2017, cross-border transactions totaled 1.1 trillion euros ($1.27 trillion). The number includes all flows, including resident and non-resident transactions, a spokesman said.

Estonia’s entire economic output was about $25 billion last year—roughly the same as that of Uganda or Nepal—suggesting that much of the money flow wasn’t directly linked to economic activity in the country.

The central bank didn’t say whether it considered any of the flows suspicious.

Estonia handled about 900 billion euros in non-resident cross-border transactions between 2008 and 2015, Bloomberg reported on Oct. 3, citing figures from the central bank.

The central bank later said the figure in the Bloomberg report doesn’t relate specifically to non-resident transactions but to all flows in and out of the country, including imports and exports and routine financial transactions such as securities purchases.

Estonia’s imports and exports totaled 232 billion euros between 2008 and 2017, official data shows.

The central bank said in a statement that non-resident flows “only make up one part of the sum,” adding that it doesn’t collect separate data for those transactions.

“This is a surprising figure,” said Jakob Dedenroth Bernhoft, a Copenhagen-based expert on money laundering. “This indicates that the Danske case is not a one-off affair and that the problem related to other banks as well.”

Swedish bank Swedbank’s Baltic operations account for nearly one-fifth of its total operating profit, with Estonia its biggest market.

“We have worked continuously through the years together with authorities as well as correspondent banks to ensure that we have solid systems and processes concerning the fight against money laundering,” a Swedbank spokesman said.

“Let me underline that we do not recognize ourselves in Bloomberg’s reporting. We are a retail bank with low risk,” he said.

Figures reflecting the possible scale of money-laundering through Estonia have been emerging gradually over the last few months.

In May, data from Estonia’s Financial Intelligence Unit showed that more than $13 billion had been laundered through banks in the country from 2012 to 2016, with at least 7.3 billion of that going through non-resident bank accounts.

Last month, Danske Bank said in an internal report that payments totaling 200 billion euros, many of which it described as “suspicious,” had been moved through its Estonian branch between 2007 and 2015.

That scandal led to Danske’s chief executive stepping down, and prompted regulators across the European Union to question the oversight of the bloc’s financial sector.

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