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The Office of the Prosecutor General has ended the criminal investigation initiated against Swedbank Estonia for suspected money laundering, due to insufficient information to prove the crime.
Estonian prosecutor's office ends criminal investigation against Swedbank
29th February 2024, 17:22
The Central Criminal Police investigated two groups of Swedbank customers suspected of laundering money from crimes committed in Ukraine and Russia through Swedbank. Since Ukrainian law enforcement agencies confirmed during the investigation that the money from the crime committed there did not reach Estonia, the investigation only continued concerning the money from alleged fraud in Russia.
According to Russian law enforcement agencies, between 2011 and 2014, four billion rubles obtained from alleged fraud was illegally transferred out of Russia, and moved through Swedbank Estonia's bank accounts. This was equivalent to 81 million euros at the time.
Estonian Prosecutor General Andres Parmas said that the Central Criminal Police identified violations, leading to suspicions of money laundering being raised against Swedbank's senior employees, a client manager, and Swedbank AS.
«It involved Swedbank, through its senior employees, concealing the ultimate beneficiary of one customer group,» Parmas said. The prosecutor general said that Swedbank allowed the customer to conduct transactions with fraudulently obtained money, which was not permitted under both the then and current anti-money laundering regulations.
After the investigation, the case was forwarded to the prosecution, and the defenders had the opportunity to review the collected evidence.
«The situation unexpectedly changed for us when resolving the defenders' requests. Specifically, after reviewing the materials, one defender submitted an international audit that cast doubt on the predicate offense in Russia. The audit revealed that the damage caused by the fraud did not exist. It was related to a transaction involving the sale of shares, in which the share price in Russia was considered inflated, but according to the audit, there was no inflation,» Parmas said.
Public prosecutor Sigrid Nurm said that the Russian case involved former Russian minister Mikhail Abyzov, who has also been recently convicted in Russia.
«The fraud involved Abyzov owning majority stakes in several Russian energy companies and organizing the sale of these companies' stakes to a related business for 186 million rubles, thereby harming minority shareholders' interests. Subsequently, the company was merged with several parts and later resold back to Russia for four billion rubles. The sale occurred when Abyzov held a ministerial position,» Nurm said. Russia assessed that the company's value had not increased this much during the interim period, and the sale concealed that Abyzov was the actual beneficiary.
The prosecutor general said that further investigation would have required cooperation with Russia, however, since the start of the war in Ukraine, the Estonian prosecution no longer engages in legal cooperation with Russia.
«We are now in a situation where we have identified activities and violations in Swedbank pointing to money laundering in Estonia, but we do not have sufficient information to prove the occurrence of the predicate offense,» Parmas said, adding that it is thus not possible to press charges for money laundering.
Nurm said that several violations of anti-money laundering requirements have been identified in Swedbank Estonia.
«For example, there were cases where transfers were made in amounts that were larger by millions than those indicated in the documents. That is, the contract specified smaller volumes than the bank actually allowed to be transferred. Transfers were also made a year after the contracts ended and to accounts not specified in the contracts,» Nurm stated.
«Evidence indicated that the bank, through its senior employees and client manager, knowingly concealed the actual beneficiaries of 74 high-risk customers, allowed the execution of repeated intra-bank money loops with the funds from the alleged predicate offense to conceal the money's real origin, allowed the conversion of the obtained money into other currencies, transferred it to various jurisdictions without proper documentation, and provided misleading information to correspondent banks and the Financial Intelligence Unit. Essentially, the deficiencies allowed the bank's customers under investigation to create intra-bank transfer loops aimed at layering the money to make its origin more difficult to trace,» she said.
Nurm noted that the client manager asked their superior for permission to make the transfers, which was granted within minutes. The investigation found that it was possible to delete transactions from Swedbank's anti-money laundering system without leaving log files, and that such deletions had indeed been made.
The prosecutor's office said that Swedbank was aware of the customer group in question having an individual with a Russian state background behind it. There was an unspoken consensus among Swedbank's client manager and senior employees to accept straw men as the real beneficiaries. The prosecution asserts that Swedbank knew Abyzov was the true beneficiary of this group, yet they submitted misleading information to the Financial Intelligence Unit, omitting Abyzov's involvement.
«Even though the criminal case cannot be sent to court, the thorough investigation succeeded in uncovering what occurred in the bank. At the time investigated, the general awareness of money laundering risks was significantly lower than it is today, but despite this, the bank should have correctly followed anti-money laundering requirements. In cooperation with the police, the Financial Supervision Authority, and the Financial Intelligence Unit provided the prosecution with a comprehensive overview of the bank's violations and how the bank improved its anti-money laundering operations during that period. For example, in 2016, the bank had seven anti-money laundering officers, but by 2019, there were already 74,» Nurm added.
Despite the deficiencies and violations in Swedbank's anti-money laundering efforts, the mere violation of anti-money laundering requirements does not constitute a crime in the Estonian legal system. According to the anti-money laundering law in effect at that time, to constitute a money laundering offense, it must be proven that the predicate offense occurred, the money originated from the predicate offense, and the transactions with the money were conducted with the intent of money laundering. If any of these elements are not sufficiently proven, then, according to the law, no accusation of money laundering can be made. Therefore, the Office of the Prosecutor General has terminated the criminal investigation.
Before 2014, institutional money laundering -- the failure to report a suspicion of money laundering to the Financial Intelligence Unit or submitting false information -- was punishable as a crime. However, this act was decriminalized with the amendment to the Penal Code that came into effect in 2015. According to the prosecution, such definition of the crime could facilitate the resolution of similar cases in the future.