Amounts of money transferred cross-border through Estonian banks
- The value of cross-border transactions made by customers of Estonian banks is not exceptionally high in international comparison.
- The value of international payments initiated in Estonian banks in 2008-2015 was 3.1 times the GDP of Estonia, which is a similar ratio to those of Belgium, France and Finland, and behind that of Germany for example.
- The value of international transactions per capita in Estonia was substantially below the European average.
- Cross-border settlements are a natural part of the functioning of an open economy such as Estonia. Eesti Pank statistics on cross-border payments do not give an indication on the share of possible high risk transactions from the anti-money laundering perspective. It is very misleading to think that all the international payments of the whole country are suspicious.
- It is inaccurate to simply add together the amounts of money paid into accounts by bank customers and withdrawn from those accounts and describe it as the amount of money moving through a bank or through a national banking system.
The total value of cross-border customer payments made by Estonian commercial banks in 2008-2015 was 441 billion euros for incoming payments and 446 billion euros for payments from Estonian banks to banks in foreign countries. This amount includes all of the cross-border settlements for sales and purchases of goods and services by customers of Estonian banks together with financial transactions such as the purchase and sale of securities or equity ownership, loan transfers, or monetary transfers related to the use of the European Union structural funds. The total amount also includes transfers between non-residents. In these cases the money moves from a non-resident account in a foreign bank to the account of a non-resident customer in an Estonian commercial bank, or the other way. Eesti Pank collects payment statistics in the format agreed upon at the European Union level, which does not include information on bank customers’ residency. Therefore we cannot provide separate data on transactions between non-resident customers at Estonian banks. As companies can be established by foreigners in any member state of the European Union and high risk transactions can similarly be made by local companies, then such information would also not be particularly useful for assessing the risk of money laundering in a country.
|Outgoing cross-border payments||53||44||46||48||56||72||68||58||446|
|Incoming cross-border payments||50||40||43||50||59||69||69||61||441|
Cross-border payments by Estonian banks in international comparison
The volume of cross-border payments in Estonian banks is not exceptionally high in international comparison. It is quite usual for the volume of cross-border payments to be several times larger than the GDP of a country, and particularly so for smaller countries with an open economy and strong engagement in international trade, or where the banking sector serves a lot of foreign customers. Following the money laundering scandal at Danske Bank, the focus has especially been on cross-border payments made up to 2015. The value of international payments initiated in Estonian banks in 2008-2015 was 3.1 times the GDP of Estonia, which is a similar ratio to those of Belgium, France and Finland, and behind that of Germany for example. The highest ratios in the European Union for cross-border payments to GDP during that time were in Malta, Cyprus and Luxembourg, which are small countries where the value of cross-border payments initiated by local banks was more than 10 times the GDP of the country. The value of such transactions per capita in Estonia was substantially below the European average.
It is misleading to add together the amounts of money coming into Estonia and sent out from banks here and to describe that as foreign money passing through Estonia. Cross-border settlements are an indivisible part of the circulation of the lifeblood of the Estonian economy and it is not reasonable to consider all cross-border payments by Estonian banks as suspicious. In the case where a suspicious one euro is transferred to an Estonian bank and from there on to a foreign bank, it would still be only the same one euro and it cannot be turned into two suspicious euros by adding the two transactions together. Almost all the recent commentaries on the money-laundering risk of the Estonian banking sector have slipped up on this point of logic. This is why the following figures based on data from the European Central Bank show only the payments made abroad from the banks in each country.
Important observations on the methodology for compiling payment statistics
Eesti Pank compiles payment statistics using the principles agreed jointly in the European Union. As there have been changes in the structure of the data collected in recent years, care is needed when adding amounts together over a long period. The data presented on the Eesti Pank website contain intra-group settlements by banks and other inter-bank payments alongside customer payments up until May 2012. So they include for example loan payments between parent banks in Sweden and their subsidiaries in Estonia. These transactions are removed from the table presented earlier, where only customer payments are shown. One therefore cannot directly compare the payment volumes from before 2008 as up until then the reporting by the banks did not distinguish between different types of payment. This means it is not possible to distinguish customer payments in earlier years from financial transactions made by the banks themselves such as transfers within banking groups, overnight loans, money market transactions and similar.
What share of cross-border transactions may be at risk of money laundering?
It is not possible to say precisely what share of transfers made through banks in Estonia or any other country have been of dubious origin or at risk of money laundering. This would require a comprehensive audit, with full background checks of all the customers of a bank and individual investigation of every single transaction. This is why the experts from the Bruun & Hjejle law firm that investigated the transactions of Danske Pank identified 9.5 million transactions made in 2007-2015 by 15,000 non-resident customers in the total amount of 200 billion euros but were not able to say what share of those transactions may actually have involved any money laundering.
The work of Estonian authorities in combating money laundering in particular from the financial supervisor’s perspective is discussed on the Finantsinspektsioon website.