Making money moves
It was great to work with the OCCRP on their latest investigation into the checkered relationship between Swedbank Estonia and minerals giant Solway. The relationship finally ended in 2011 after shell companies related to the mining group had paid out under $2 billion in several hundred suspicious transactions. Solway denies it was involved in any illicit transactions.
You can read the full story and my take here.
“Transactions labeled generally for things like consulting or legal services and office equipment are an easy way to make illegitimate transfers of value between companies look genuine,” said anti-money laundering expert Eryn Schornick.
“Airs of legitimacy can quickly dissipate and a trend toward the involvement in illicit business as a pattern of doing business with nefarious companies and individuals emerges, especially in an operating environment that we would later learn was rife with money laundering.”
Investigators have uncovered evidence that over €200 billion was laundered through accounts in the Estonian branches of Swedbank and Denmark’s Danske Bank between 2007 and 2015. Much of this flowed from Russia and Eastern Europe to shell companies, in one of the world’s largest-ever money laundering scandals.
The case points to the tried-and-tested tactics used to launder large sums of dirty money: The evidence uncovered by the investigation shows that multi-million-dollar payments were typically labelled as being for consulting or legal services and office equipment. It is very difficult to trace ‘consultancy’ in any meaningful sense.
The OCCRP data shows that two companies, Merabella and Weenlix, paid close to $1.5 million to Solway Real Estate and another company, among a network of 23 related companies receiving funds between 2006 and 2009, mainly marked as payments for office equipment.
The new regime of tighter sanctions against Russian firms and oligarchs should, we hope, tackle some of the tactics used by Solway, its beneficial owners, and any others who may have benefited from the suspicious transactions. Even still, the fact that it has taken a decade for this web of payments to be brought fully into the public domain also underscores the difficulties facing transparency and accountability advocates in accessing evidence and regulatory delays and failure.
Ironically, it appears that some of the funds transferred by one of the companies involved, Weenlix, were related to the original tax fraud case exposed by Sergei Magnitsky. Magnitsky’s jailing and subsequent death from maltreatment prompted the passage of recent anti-corruption laws in the United States and elsewhere.
International banks also flagged four of the 23 companies to the US Treasury Department’s Financial Crimes Enforcement Network.
But the investigation also paints a picture of regulatory failure. Due diligence and transparency rules have since been tightened, but the legal frameworks in place at the time should have been sufficient for the payments, their volume, and the size of the transactions, to have raised ‘red flags’ with regulators. They appear not to have done so.