Lithuania ‘distinguished’ from other Baltics on money laundering

Lithuania’s finance minister tells GlobalMarkets why he is confident that his country has a lower exposure to money laundering risk than its Baltic neighbours because of its relatively low level of non-resident deposits.

  • By Jasper Cox
  • 08 May 2019
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Lithuania is less exposed to money laundering scandals than its neighbours, according to finance minister Vilius Šapoka. His remarks come amid growing fears that foreign banks which dominate the Baltics could pull out of region following the scandals. 

“We never tolerated, we are not tolerating and we are not going to tolerate any kind of money laundering,” said Šapoka. “Talking about the Baltics, Lithuania is distinguished in terms of the lowest systemic risk as regards money laundering because for many years the proportion of non-resident deposits was approximately 2% of the whole pool of deposits and in our neighboring countries that figure sometimes was even more than 50%.”

Šapoka also said that fintech and especially blockchain could be “part of the solution” for risks including money laundering.

There is a strategic lesson to be drawn from the money laundering scandals, according to André Küüsvek, director for local currency and capital markets development at the EBRD.

“There is a big need to develop other parts of the financial sector,” he said. “If the Scandinavian banks were to pull the plug that would be a very significant shock to the economy as a whole. We would need to develop other parts of financial markets.”

However, contrary to some reported fears in the region, Küüsvek does not believe Swedish banks will follow Danske Bank in pulling out.

In February, the Estonian government ordered Danske to leave the country, after the bank revealed €200bn of non-resident money went through its Estonian branch between 2007 and 2015. It said it would pull out of not just that country but the Baltics as a whole.

Profitable business

Swedbank has also been embroiled in a high-profile money laundering scandal.

Scandinavian banks dominate the three Baltic countries: notably SEB, Swedbank and Luminor Bank. The latter is owned by DNB and Nordea, but a majority stake is being sold to Blackstone.

“If you look through the lens of these banking groups, even though they are very dominant banks in the Baltics, the Baltics still only represent a small fraction of their overall balance sheet or profits,” said Küüsvek. He added that when incidents like the money laundering reports crop up, shareholders ask about their operations there.

But the Swedes may be more likely to remain. “The Baltic business actually is very, very profitable,” he said. In contrast: “Danske was the one that tried to catch up and never really managed.”

SEB said: “The three Baltic countries constitute three of our nine home markets and we look forward to continue to grow together with our customers.”

In its first quarter report, Swedbank referred to higher lending volumes and the launch of new pension funds in the countries.

  • By Jasper Cox
  • 08 May 2019

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1 JPMorgan 220,923.99 993 8.24%
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4 Barclays 161,566.17 657 6.03%
5 HSBC 132,739.21 719 4.95%

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1 BNP Paribas 27,275.91 109 7.96%
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3 JPMorgan 21,834.93 53 6.37%
4 Bank of America Merrill Lynch 21,222.68 53 6.20%
5 SG Corporate & Investment Banking 16,639.52 78 4.86%

Bookrunners of all EMEA ECM Issuance

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1 JPMorgan 7,363.27 46 9.68%
2 Morgan Stanley 7,283.40 35 9.57%
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4 Citi 5,594.80 40 7.35%
5 UBS 4,691.07 23 6.17%