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The rise of dirty money in Europe

The Rise of “Dirty Money” in Europe

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Is there a rise of dirty money coming along in Europe? According to experts, banks from the Old Continent are undergoing a surge of record-breaking fines.

From HSBC to Commerzbank, BNP Paribas and other Nordic banks, a “crackdown on illicit cash” has made the headlines for the past few years, emphasized in a recent story by Bloomberg

As Russian individuals and business partners are reportedly owning $1 trillion outside of their country, a 2017 Bloomberg Economics study resurfaced, putting into light laundered money in the U.K, Cyprus and Switzerland. 

European main banks involved

Money laundering has been the burning topic in the finance industry for decades. However, it seems that the trend has only increased since the 2008 financial crisis.

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In 2012, HSBC Holdings Plc was fined about $2 billion for “handling funds from drug traffickers, terror groups, and Washington-sanctioned nations such as Iran”, reported Bloomberg earlier this month.

Two years later, BNP Paribas had to pay nearly $9 billion for doing business with Iran, Cuba and Sudan – all blacklisted by the United States. And about three years later, in 2015, German Commerzbank AG was fined $1.45 billion by the White House for similar reasons.

Read on Alvexo: “MPs Accuse UK or Turning ‘Blind Eye’ to ‘Dirty Money’ from Russia”

$230 billion at Danske Bank

Last September, Danske Bank revealed that $230 billion in its treasury that flowed between 2007 and 2015 from one of its Estonian unit were from a “suspicious origin”.

Last March, the Organized Crime and Corruption Reporting Project, also known as OCCRP leaked new confidential data to Bloomberg accusing Danske Bank.

However, Matis Maeker from the Estonian FSA says he acted to stop money laundering through Danske Bank efficiently in 2014 and acted surprised while being questioned: “No one knew about those cases at the time. We managed to close it down, we feel we were effective”, he said in a recent interview for the media Moneylaudering.com. 

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Europe, Russians’ top destination

In April 2018, worldwide famous economists Filip Novokmet, Thomas Piketty and Gabriel Zucman published a study about countries that Russians were targeting Cyprus, Switzerland and the United Kingdom to launder money.

They estimate that Russians hold more than $1 trillion outside their country. “Offshore wealth is about three times larger than official net foreign reserves (about 85% of national income vs. around 25%)”, the economists wrote.

In their report, they explain that the Soviet Union’s fall only widened wealth disparities in the country. As it turned out, “the top 10% income share rose from less than 25% in 1990-1991 to more than 45% in 1996”.

Through investments in the real estate markets as well as financial mechanisms, Russians laundering money in Europe have had real consequences for European citizens – such as the rise of rents and restaurants prices in London.

At the moment, sanctions have not been applied and experts consider that European governments are too complicit in “dirty money”. Last month, the International Monetary Fund recently confirmed that money laundered across the globe is estimated between 2% to 5% of the global GDP,  at roughly $2 trillion.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.