Swedbank Escapes Money Laundering Charges in Estonia: Insufficient Evidence Surfaces

The Estonian Office of the Prosecutor General has dropped a criminal investigation into Swedbank Estonia for suspected money laundering due to lack of concrete evidence.

Allegations of Money Laundering in Swedbank Estonia

Swedbank Estonia, the local arm of Swedbank AB, came under scrutiny following allegations of money laundering involving two groups of its clients. The clients were suspected of transferring potentially illicit funds derived from crimes in Ukraine and Russia through the bank.

Complicit Employees and the Bank

The Central Criminal Police identified Swedbank’s senior employees, a client manager, and the bank itself, Swedbank AS, as being complicit in concealing the ultimate beneficiaries of the client group under investigation. This allowed the customers to move funds potentially originating from criminal activities without raising suspicion.

Fraud Allegations and the Source of Funds

Central to the case were four billion rubles (approximately 81 million euros at the time) allegedly transferred out of Russia between 2011 and 2014. A significant portion of these funds flowed through Swedbank Estonia’s accounts and were suspected to be proceeds from fraud.

The Case Hits a Roadblock: Doubts on the Existence of the Predicate Offense

A recent twist in the case saw one of the defenders providing an international audit casting doubt on the very existence of the predicate offense in Russia. The audit purportedly showed no evidence of the damage caused by the fraud, which was central to the accusations against the clients.

Russian Authorities’ Claims

Russian authorities also claimed that the former minister Mikhail Abyzov, who was recently convicted on money laundering charges, was involved in the fraudulent sale of energy company stakes through Swedbank Estonia. However, the investigation hit a roadblock due to insufficient cooperation from Russian authorities.

Insufficient Evidence for the Predicate Offense

“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,” Estonian Prosecutor General Andres Parmas said in a statement.

Diplomatic Tensions and Lack of Cooperation

Further investigation would require cooperation with Russia but has been suspended due to diplomatic tensions between the nations following the start of the conflict in Ukraine.

Swedbank’s Response and AML Procedures

Swedbank Estonia acknowledged that some Anti-Money Laundering (AML) requirements were not met during the time under investigation. However, the bank insisted that the mere violation of these regulations does not constitute a criminal offense in the Estonian legal system.

Decriminalization of Institutional Money Laundering

Before 2014, institutional money laundering - failure to report a suspicion of money laundering to the Financial Intelligence Unit or submitting false information - was punishable as a crime. The crime was decriminalized with the amendment to the Penal Code in 2015. Estonian officials argue that this change enables more efficient resolution of such cases in the future.

Swedbank’s Commitment to Transparency and AML Procedures

Swedbank reiterated its commitment to transparency and working with authorities to enhance its AML procedures following the investigation.