State Prosecutor's Office closes Swedbank money laundering investigation

The Estonian State Prosecutor's Office has closed its investigation into possible money laundering at Swedbank between 2011 and 2016.
In March 2022, the State Prosecutor's Office launched a criminal investigation against Swedbank Estonia and its former executives due to suspicions of money laundering of more than €100 million.
Priit Perens and Robert Kitt, who headed Swedbank Estonia, along with board members Ulla Ilisson, Heiki Raadik, Vaiko Tammeväli, Rait Pallo and Kaie Metsla, as well as former head of Swedbank Estonia's anti-money laundering department Toomas Tuuling, and account manager Aleksei Averson, were all suspected.
Although evidence suggested the bank had engaged in activities and irregularities indicative of money laundering, it is not possible to gather additional evidence to prove suspicions regarding the criminal origin of the money involved. As a result, no charges can be brought to court.
Speaking at a press conference on Thursday, Estonian Prosecutor General Andres Parmas, said that the proceedings ought to be closed despite a thorough investigation having taken place.
"Today we are in a situation whereby we have established with evidence that there were activities and irregularities within Swedbank in Estonia that suggest money laundering. However, we do not have enough information to consider that a predicate offense has been proven. Without this, according to Estonian law, [a prosecution for] money laundering is not possible, and therefore we are not in a position to prosecute for money laundering in this criminal case," Parmas said.
During the criminal proceedings, the Central Criminal Police examined the circumstances of two groups of customers, in relation to money from crimes in Ukraine and Russia, which may have been laundered through Swedbank. After Ukrainian law enforcement authorities confirmed that the money from the crime committed in Ukraine did not reach Estonia, the investigation continued in relation to the funds connected to an alleged fraud in Russia.
According to the Russian law enforcement authorities, four billion Rubles' of allegedly fraudulent money was illegally exported from Russia in 2011-2014 and subsequently moved through Swedbank's Estonian bank accounts. At that time, exchange rates meant the sum amounted to approximately €81 million.
During the pre-trial investigation, the information received from Russia regarding the alleged predicate offense coincided with other evidence gathered internationally in the criminal case. The bank had also been found to have deficiencies in its money laundering prevention process, so there was no reason to doubt the information provided.
At the end of the pre-trial proceedings, the defense was given the opportunity, in accordance with the law, to present its objections and arguments regarding the predicate offense as well as to other material collected during the criminal case. The analysis of all the additional information did not sufficiently dispel suspicions that the proceedings in Russia may be politically biased and that as a result, the outcome would not be accepted by the Estonian legal system without additional verification.
This was due to the case having been presided over by the same judge involved in the trials of both Sergei Magnitsky and Alexei Navalny. An additional confiscation procedure of all assets was handed out prior to the verdict, and the conclusions of the Russian state expert's report have also been queried by an international audit.
Parmas said that the only way to verify the suspicions raised would be to cooperate internationally with Russia. However, since Russia's full-scale invasion of Ukraine began, that has no longer been possible.
"Under the law in force at the time, one of the prerequisites for money laundering was that the money, the nature of which was concealed or altered, must have been derived from a crime. If the criminal origin of the money has not been established, a breach of the anti-money laundering requirements does not in itself constitute grounds to convict someone of money laundering. We have been working hard on the material in this criminal case, discussing the various options with several prosecutors and doing our utmost to reach legal clarity," said Parmas.
Evidence to disprove the suspicions raised could be gathered exclusively from the Russian Federation, however, there has been no international cooperation with Russia since the start of its invasion of Ukraine. Even if it were hypothetically possible to obtain evidence from Russia, Parmas said that the prosecution would have to question its reliability due to the new circumstances.
"The same issues would arise in a trial, where the court would have to interpret unresolved doubts in favor of the accused," Parmas said.
State prosecutor Sigrid Nurm said that the proceedings had established several shortcomings in relation to Swedbank's compliance with anti-money laundering rules during the period under investigation.
"The evidence indicated that the bank, through its executives and account manager, deliberately concealed the true beneficiary of 74 high-risk customers, allowed repeated intra-bank money circuits to be carried out using the money from the alleged predicate offense in order to conceal the true origin of the money, allowed the money that was received to be converted into other currencies and transferred to different jurisdictions without the correct supporting documentation, and provided corresponding banks and the Financial Intelligence Unit with misleading information," Nurm said.
According to Nurm, the shortcomings allowed the bank's clients, who were under investigation, to create money circuits via intra-bank transfers, designed to stratify the money and make it harder to trace its origins.
"Although it was not possible to bring a criminal case to court, a thorough procedure was able to clarify what had happened at the bank. At the time of the investigation, the general awareness of money laundering risks was significantly lower than it is now, but the bank should nevertheless have properly complied with anti-money laundering requirements," said Nurm.
According to Nurm, the work carried out in cooperation with the police, the Financial Inspectorate and the Financial Intelligence Unit provided a thorough overview of the bank's violations, as well as how the bank subsequently improved its anti-money laundering procedures during the period in question. For example, the bank had seven anti-money laundering officials in 2016, but by 2019 it had 74.
Despite the deficiencies in money laundering prevention procedures and breaches at Swedbank, breaching of anti-money laundering requirements alone does not constitute a criminal offense under the Estonian legal system.
According to the version of the Money Laundering and Terrorist Financing Prevention Act in force at the time, the criminal offense of money laundering requires proof of the commission of the predicate offense, as well as the origin of the money from the predicate offense and money laundering activities. If any of these elements is not sufficiently proven, the law does not enable a charge of money laundering to be brought. The State Prosecutor's Office therefore closed the criminal proceedings.
While before 2014, so-called institutional money laundering, i.e. the failure to report suspicions of money laundering to the FIU or the provision of false information, was also punishable as a criminal offense, it was decriminalized in an amendment to the Estonian Penal Code, which entered into force in 2015. In the view of the Prosecutor's Office, this would potentially simplify similar cases in the future.
Following the announcement from the State Prosecutor's Office, Swedbank also announced that the proceedings had been closed and that the bank had cooperated fully with the authorities.
"With the decision of the prosecutor in Estonia, we can leave yet another investigation of historical shortcomings behind us," said Tomas Hedberg, head of the special task force and vice president of Swedbank.
--
Follow ERR News on Facebook and Twitter and never miss an update!
Editor: Karin Koppel, Michael Cole