On October 3, a Bloomberg article reported that — according to figures that Eesti Pank (the Estonian Central Bank) provided to Bloomberg — between 2008 and 2015, banks doing business in Estonia handled about €900 billion ($1.04 trillion) “in cross-border transactions including non-resident flows.” In light of Danske Bank’s recent admission that between 2007 and 2015 $234 billion in potentially suspicious transactions flowed through its Estonian branch, the article went on to state that that total “represents less than a quarter of cross-border transactions that passed through the country at the center of the dirty money saga.”
That same day, Eesti Pank issued a response stating that
Bloomberg erroneously said that 900 billion euros’ worth of non-residents’ payments passed through Estonia in 2008-2015. These 900 billion euros are actually the aggregate amount of cross-border payments received in Estonia and paid from Estonia. The sum includes import and export by Estonian companies as well as routine financial transactions such as securities purchases.
Eesti Bank also stated that “[c]ross-border payments certainly include non-resident flows, but the central bank does not collect separate statistics for these transactions,” and that “central bank statistics do not hold information on whether the person who initiated a payment in a foreign or an Estonian bank was a resident of Estonia or not.”
Note: This exchange between Bloomberg and Eesti Pank requires some close reading. On the one hand, Eesti Pank’s assertion that Bloomberg said €900 billion “worth of non-residents’ payments” is simply incorrect. The Bloomberg article stated that the €900 billion figure pertained to “cross-border transactions including non-resident flows.” (Emphasis supplied)
On the other hand, the article’s reference to “cross-border transactions that passed through [Estonia] at the height of the dirty money saga” encourages readers to infer that the €900 billion figure reflects suspicious transactions. The report of the Danske Bank investigation, however, clearly explained that the $234 billion figure pertained only to 15,000 non-resident customers or customers with non-resident characteristics. Since Eesti Pank’s reply acknowledged that it could not break out non-resident flow statistics, it would be unreasonable to infer from the data in the article that the €900 billion is necessarily dirty money.
Yet that does not end the analysis. The Danske Bank investigation report specifically stated (at page 5) that “[b]y the end of 2013, the Non-Resident Portfolio within Danske Bank’s Estonian branch held 44 per cent of the total deposits from non-resident customers in Estonian banks (up from 27 per cent in 2007) . . . .” If that investigation was able to determine the total deposits from non-resident customers in all Estonian banks in 2013, there must be some source of data on which Eesti Bank or regulators can draw to delineate non-resident flows more precisely.
For the moment, compliance officers at financial institutions should take this exchange into account as an imprecise and unvalidated indicator of the volume of possible money laundering through Estonian banks. At the same time, they should take the opportunity promptly to review any correspondent bank relationships they had with Estonian banks from 2007 to 2015. Based on Danske Bank’s statement today that it is cooperating with U.S., Estonian, and Danish criminal investigations regarding its non-resident Estonian portfolio, financial institutions should expect that criminal and regulatory investigations into financial flows through Estonia will continue to widen in scope.