https://www.fnlondon.com/articles/how-europe-is-losing-the-fight-against-money-laundering-20181204

In mid-October, Kremlin critic and campaigner Bill Browder filed complaints against Nordea in four different countries, alleging that the Swedish bank had breached money-laundering rules, illegally distributing funds to Russian entities or individuals.

As of October 1, however, Nordea was no longer technically Swedish. It became the first big bank outside the euro area to join the eurozone’s banking union, moving its headquarters from Sweden to Finland in order to enjoy the same “predictable regulatory environment” as its big European competitors, it said when it announced the move in 2017.

Nordea did not move to a region that is stricter at stopping flows of illegal cash, however. Far from deterring the crime, critics argue that the eurozone’s banking union, with 19 different money-laundering laws and legal systems, may even favour it.

The latest controversy comes after a string of money-laundering allegations throughout the region in the last year, from scandal-ridden countries such as Cyprus and Malta to nations perceived as having better-regulated banking systems such as Denmark and the Netherlands. These incidents demonstrate how fragmented the European banking landscape remains, even after the creation of a banking union under one common supervisor. As money-laundering and the financing of terrorism have become important security concerns, efforts to shore up Europe’s capacity to track and clamp down on dirty money remain hindered by competing national interests.

Hermitage Capital Management, Browder’s vehicle filed the complaints against Nordea with prosecutors in Denmark, Sweden, Norway and Finland. They allege that more than $400m of illicit money flew to Nordea accounts in those four countries, and that the bank should have raised the alarm on the suspicious transactions.

In a statement to Financial News, a Nordea spokesman said the bank was “reviewing the documents brought forward” by Hermitage, and would provide its views to the authorities they were submitted to. The bank “takes this question seriously”, the spokesman insisted, adding that Nordea had “significantly strengthened its transaction monitoring capabilities” in recent years.

Oras, a leading Finnish manufacturer of kitchen and bathroom faucets as well as shower sets, is one of the companies mentioned by Hermitage. “We make living better” is the brand's slogan, proudly proclaimed on the website of the company that “invented the first touchless electronic faucet in the market” in the early 1990s.

According to Hermitage, Oras was also the recipient of suspicious payments totalling more than $1m from two mysterious companies, Argenta Systems (registered in Belize, and now dissolved) and Arrell Trading, that seem to have little to do with the faucet industry. Arrell Trading could not be reached for comment.

Paying for goods actually bought by another company is one of the ways money can be laundered, according to a person familiar with the complaint.

Browder’s Hermitage was once one of the largest foreign investors in Russia, before he fell out of favour with officials in the country. His lawyer, Sergei Magnitsky, died in prison there after being jailed while he was investigating a $230m tax fraud Hermitage alleges it had fallen victim to. According to Browder, Argenta played a key role in funnelling abroad the money looted from Hermitage.

The fight against money-laundering has taken on a new urgency in Europe in the last few years, because the serious amounts involved “shows it has become a security concern, with Russia the major suspect”, said a European official. Once legitimised within the European financial system, such funds can move freely to countries including the UK, where Parliament's foreign affairs select committee recently warned that “kleptocrats and human rights abusers” use the City of London to launder money and circumvent sanctions.

Such cases are increasingly coming to light. After repeated efforts by British whistleblower Howard Wilkinson, in September Danske Bank acknowledged, after an internal investigation, that the amount of money from suspicious accounts that transited through its Estonian branch amounted to around €200bn between 2007 and 2015.

Even though Estonia is in the eurozone, there is little European regulators could have done. The parent company was based in Denmark and only operated a branch, not a full-blown subsidiary, in the small Baltic country.

According to Browder, what is lacking in Europe is “the will to prosecute” guilty parties. Too often, he noted, bankers are either actively facilitating, or turning a blind eye to obviously shady transactions.