Estonian banks need to develop and improve their Anti-Money Laundering (AML) processes, including by having smarter know-your-client systems, the Bank of Estonia says, following a €1 million the Financial Supervisory Authority (FSA) imposed on the Scandinavian-owned SEB Pank on Thursday. This would be made easier by legislative changes and more resources to state bodies fighting money laundering, the bank said.
"It is unfortunate that despite the efforts that banks in Estonia have made in recent years to deal more systematically with the risks of money laundering and terrorist financing than previously, the results are still not good enough. Money laundering has no place in Estonia", said Bank of Estonia Deputy Governor Maive Rute, according to the central bank's website.
SEB bank was fined €1 million for shortcomings in its AML practices. In its homeland of Sweden, the bank was also fined a little under €100 million, for the same reason. Tens of billions of euros in illicit funds have been thought to have passed through SEB in Estonia, something which came to light ahead of an investigative show on Swedish public broadcaster SVT in November 2019, which SEB addressed publicly, ahead of the program's airing.
The Bank of Estonia says that the key solution lies in legislation to improve AML, as well as accompanying resources to the relevant authorities, to help them work effectively.
A major starting point was the June 17 implementation of EU AML directives into domestic law, the bank added. These changes will improve the quality of data relating to actual beneficial owners, will allow the banks' international operations to be monitored better, and will make information exchange between the institutions concerned more efficient, the central bank says.
Maive Rute said that the FSA fine and accompanying precept would not affect the loans or deposits for SEB clients since the bank is well-capitalized, profitable, and has good liquidity, and the Estonian financial services sector as a whole is in a strong position.
Progress has also been made on AML and related issues so far, evidenced by the fact that only 1 percent of deposits in Estonian banks come from outside the eurozone nowadays. Most of the potentially illicit funds chaneled via SEB, as well as those via Swedbank (put at €135 billion in an earlier SVT broadcast in March 2019) and Danske Bank (around €160 billion, in the period 2007-2015; the bank has since closed its operations in Estonia), were from outside the EU, primarily the Russian Federation and other countries in the region.
An earlier SVT investigation in March last year claimed that within a 10 year period, around €135 billion in high-risk money moved through the Swedbank's Estonian branch. The prosecutor's office launched an investigation into Swedbank Estonia last year.
Danish-owned Danske Bank was forced to close its operations in Tallinn late last year, after investigations revealed that as much as €160 billion in potentially illicit funds had passed via the bank 2007-2015.
"Even so, the banks must make more effort and investment to be able to track down attempts at money laundering better and faster and to make sure that work to stop money laundering does not push honest clients out. This needs more to be invested in smart information systems above all, and the financial position of the banks in Estonia is good enough for them to do that", Rute added.
Editor: Andrew Whyte