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The Baltic States and the North Eastern European Criminal Hub

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The Baltic States and the North Eastern European Criminal Hub AML AROUND THE WORLD The Baltic States and the North Eastern European criminal hub he Baltic States (Estonia, Latvia Most prominent in the region — Lithuanian Estonia and Lithuania), are located in organized crime groups In the early 1990s, Tallin, Estonia’s Twhat EUROPOL maps out as the Although the role of organized crime capital, was ranked among the world’s North-East Criminal Hub. Given their geo- groups from all three Baltic countries most violent capitals. Gang wars erupted graphical location on the EUs most Eastern should not be underestimated, a cen- throughout the former Soviet Union. The borders, the Baltic States facilitate not tral role for Lithuania organized crime main protagonists listed by Rawlinson only the illegal entry and distribution of seems to have emerged within the included the Riga, Perm, Novosibirsk, goods and people within the EU, but also region. Lithuanian groups are acting as Krasnodar, Azerbaijan and Chechen the making of financial crime committed important traffickers in many criminal groups. The only powerful Estonian group through the region’s financial institutions. markets and regional locations, often during this period was the Saha-Loo or The North-East region of the EU is both beyond the borders of the North-East ‘poultry complex’ group. The dominance a transit area and an important destination region. In some cases, Lithuanian orga- of Russian-speaking organized crime is market for various commodities ranging nized criminal syndicates within the largely attributed to the proliferation of from smuggled and counterfeit cigarettes region including the Polish, Latvian illegal arms and the development of the to synthetic drugs, and therefore serves and Estonian groups, may act as ‘bridg- metal trade for which Estonia became a as a bridge between criminals operating ing groups’, procuring goods from the major center. in Russia, Belarus and Ukraine and those global markets for specific sections of Following Estonia’s independence in operating within the EU criminal envi- the regional market. The Lithuanian 1991, the Russian army withdrew from ronment. The Baltic States tend to play Organized crime groups act both as the country. This was followed closely an intermediary role in facilitating the independent players and as a main by the implementation of the Estonian illegal flows originating in the west, such regional link to EU and global criminal Nationality and Language Laws, which led as ecstasy, cocaine and cannabis products. markets for other regional groups. to a marginalization of the Russian minori- The region is also used as a transit area for ties from key private and public positions. counterfeit goods from Asia destined for Some historical details — The influence of So by the end of 1994 the Estonian Prime the Russian market. Russian organized crime Minister felt that he could claim, that The EUROPOL report furthermore The collapse of the Soviet Union and almost all Russian mafia-style criminal underlines, that the organized crime the independence of the Baltic States the gangs had been eliminated. groups active in the North-East hub also Russian influence, significantly impacted The economic development of Estonia look eastwards to other important destina- the development of criminal structures saw individuals linked to criminal orga- tion markets, in addition to their activities throughout the course of the early 1990s. nizations enter into many sectors of the in their neighboring Nordic countries and There are significant differences evolving economy. These individuals other EU Member States. regarding the origins and development were, according to Rawlinson, largely Many banks based in the Baltics have of organized crime in the three Baltic Estonian nationals and not those of been accused of facilitating money laun- States and therefore rather heterogeneous Russian-speaking origin. During this dering and tax evasion. Parex Bank was organized crime structures and activi- period the financial sector also evolved, particularly criticized by an article pub- ties have merged in the individual states and with it came increased levels of eco- lished in Foreign Policy in June 2009 for since the 1990s. In the following, the three nomic crimes such as money laundering. providing convenient means for Russians countries, Estonia, Latvia and Lithuania Compared to the other Baltic States and to get their money out of their home will be detailed individually. The details Russia, the extent of economic crime in country, and has amongst other institu- presented are derived from research Estonia remains limited. tions come under intense scrutiny from undertaken by Dr. Paddy Rawlinson a lec- In 2004 two Estonian criminologists — international officials seeking to combat turer on Criminology based at the London Anna Markina and Jüri Saar, published money laundering. School of Economics. the results of their study on cross-border 36 ACAMS TODAY | September–November 2009 www.ACAMS.org AML AROUND THE WORLD The key players in the Latvian criminal scene following the elimination of the first generation of criminals (Komarnitski, Balulis and Abakumov) in the early 1990s were the Lavent and and Leskov families, both linked to Vyacheslav Ivankov (aka Yaponchik), the so-called godfather of the Russian Mafia. Lavent and Leskov played a key role in the formative years of Latvia’s financial services sector. In 1995 Lavent founded Banka Baltiya and was appointed President of the bank. During the same period Leskov invested funds in the rival bank Olympia. Rawlinson lists the leading Latvian criminal associa- tions and individuals to be Ivan Hartinov (Godfather of Latvian organized crime), Bosri Raigorodski (heads the Pardaugava brigade and a former business companion of Leskov and Lavent). She highlights that, like in Russia, complex criminal networks have been formed using sporting associa- tions (in particular boxing) to develop suc- cessful security/protection businesses and other commercial ventures. In 2007, Jane’s Intelligence Review noted that political corruption tax evasion, drug trafficking and other forms of smuggling, were prominent sources for money laun- dering in the Baltic States. Due to the crime and Estonia’s accession to the EU. regard to combating money laundering region’s susceptibility to the phenomenon They made a point of trying to balance Estonia overall appears to have made good Latvia was, according to the article, repeat- any misperceptions noting that the flow progress in particular compared to Latvia edly designated as a major money laun- of criminality went in two directions; and Lithuania. Nonetheless, the country dering country by the U.S. Department i.e., from East to West and from West to remains venerable and is still believed to of State. The country continues to be East, highlighting that many questionable be used as a channel for money laundering listed as one of the ‘Jurisdictions of individuals from Western Europe had par- and tax evasion. Primary Concern’ in its 2009 International ticipated in the privatization of Estonia’s Narcotics Control Strategy (INCS) report. major infrastructure in the mid 1990s. Latvia Rawlinson notes that corruption and With regard to the situation surrounding The transition period following the the subsequent integration of organized economic crime following accession, their collapse of the Soviet Union left room for crime into Latvia’s legitimate structures results showed that 80% of the experts similarly chaotic and violent develop- is systemic and that the creation of the questioned believed that money launder- ments in Latvia, as has been described anti-corruption program set up in 1999 is ing would increase in Estonia following for Estonia. Unlike in Estonia however, faced with much damage already done. accession, in particular in the form of mis- the Russians residing in Latvia were The development of the banking sector appropriation of EU funds through fraud and remained much greater following was accompanied by corruption, fraud and counterfeiting activities. independence. Latvia was not equally as and misappropriation of funds allegedly The study also notes that the level of cor- successful in its restructuring process also involving Latvian politically exposed ruption in Estonia was among the lowest and thus the Russian influence remained persons (PEPs). This development also fos- in the EU acceding countries. In 2008 ingrained in many senior functions held tered ties between the criminal and ‘legal Estonia ranked 27th, on Transparency by the Russian community. Rawlinson world resulting in undemocratic struc- International’s Corruption Perception highlighted that in particular, aggres- tures and devastating long-terms prob- Index (“CPI”), second only to Slovenia, sive relations became evident in the lems. Not least to mention the economic in Central and Eastern Europe, and posi- financial sector where the relationship and political crisis currently facing the tioned better than many other Western between Latvia and Russia flourished. country as a result of the financial crisis. European states. It is also worth noting The large number of ethnic Russians In 2008, after years of booming economic that, according to the MONEYVAL report based in Latvia’s capital, Riga, fostered success, the Latvian economy took one published in 2008 claimed that according close ties with the burgeoning economic of the sharpest downturns in the world. to EUROPOL, Estonia is among the six elite in Moscow and were, according to Latvia saw its worst
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