Fight against money laundering costing Ida-Viru County hundreds of jobs

Danske Bank logo.
Danske Bank logo. Source: ERR

Over the past year, nearly 500 jobs have not been created in Ida-Viru County, which faces the highest unemployment rate in the country, as companies planning manufacturing businesses have not managed to open bank accounts at banks operating in Estonia, regional paper Põhjarannik writes.

The ballpark figure of likely 500 jobs was cited to the paper (link in Estonian) by Teet Kuusmik, a board member at Ida-Virumaa Industrial Areas Development, a foundation which manages industrial parks in Narva, Jõhvi and Kohtla-Järve. He cited nearly 155 companies which have purchased properties at these industrial parks where plants should already be being built, but where in reality nothing is happening because banks operating in Estonia have refused to open bank accounts for them, and if any previously had bank accounts, then the accounts were simply closed.

Nearly all of the companies in question are manufacturing companies too, not virtual money-movers, and according to Kuusmik, they are certainly not all companies from Russia, Ukraine or other third countries with whom money laundering risks are traditionally higher.

Kuusmik has compiled these incidents into one file, which he read off while shaking his head.

"Business, headquarters in Germany, 50 employees, has made €15 million in investments in Estonia, annual turnover in Estonia of €16 million, bank simply shut down their account," he recited. "Another company active in Estonia was planning a follow-on investment, but cannot make it as their bank closed down their account and others weren't willing to open one. A third company wants to establish a company with 50 jobs, but their bank closed down their account during the preparatory period."

He could continue, as a couple of dozen such cases exist based on documents that have reached him alone. As someone who is in close contact with entrepreneurs, he has heard similar stories elsewhere as well.

"This January, one major bank announced that it was closing the account of a company that has operated in Ida-Viru County for 23 years," he said. "One company that has operated in Estonia for 18 years had its accounts closed down by several banks, and by now this company has essentially ceased operations. They operated very financially and were continually expanding. But then they received one transfer from the wrong country, so to speak, in banks' eyes, and this is how the banks responded."

Minister of Foreign Affairs and IT Kaimar Karu referred to the issue in a February 16 letter regarding Ida-Viru County's future developments as well.

"Due to the implementation of anti-money laundering measures, a banking sector regulation is restricting local companies' export opportunities and the bringing of new investments into the region," Karu wrote. "The bringing of foreign investments to Estonia and the continued operation of local exporters is currently significantly impaired. According to unverified data, thousands of companies' bank accounts have been closed or have not been opened at banks."

According to Aivar Kokk (Isamaa), chairman of the Finance Committee of the Riigikogu, all parties involved in the issue will be meeting in the committee next Tuesday.

"We are thoroughly seeking possible solutions," Kokk said. "On the one hand there are money laundering issues, but on the other, entrepreneurship must be able to continue in Estonia. We have halted the new anti-money laundering directive in the Riigikogu until a solution is found ensuring that this directive does not impede the development of entrepreneurship in Estonia."

Demands on banks for the prevention of money laundering have increased dramatically since 2014 and become particularly effective since the money laundering scandal in connection with the Estonian branch of Danske Bank.


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Editor: Aili Vahtla

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