A Little Closer Than Switzerland

It’s 2008 in Estonia, the European debt crisis is starting to take form. 17 years earlier two Russian entrepreneurs Kargins and Krasovija started an exchange office in the train station of Riga after the Estonian independence. Within 10 years K&K managed to turn it into the biggest bank of the country with the infamous slogan “Estonia. A little closer to home than Switzerland”.  

Around that time Wikileaks published suspicions that the savings of the bank were not from Estonians, but Russian criminals who drove their bags of cash across the border out of reach of the Russian treasury. These suspicions were later confirmed by an ex-employee. The ex-employee also raised concerns about K&K lending out their private capital to their bank at usurious interest, paid for by the Russian savings.
No one complained, until the the crisis hit Estonia in 2008. Banks had to take losses, but like many other European banks at the time their equity couldn’t take the hit. Most Estonian banks went bankrupt, but one was saved.

Must have been a true Estonian bank that got saved and not Parex owned by our two Russian friends , right? Wrong. The Estonian government took a 7,5 billion euro loan to save Parex, skyrocketing their Debt-GDP ratio up from 0% to 40% all thanks to K&K.

Following the loan heavy spending cuts were announced and banks that held the Estonian savings went under. This spurred violent incidents against the authorities in the streets of Riga. But in the end, the Russian savings were saved, thanks to European tax payer money. 

Put it in the laundry, Europe pays

 Fast-forward to 2010. The EBRD (European bank for reconstruction and development) decided, for the first time in it’s existence, to buy 25% of Parex with 82,000,000€ West-European taxpayer money. The bank was nationalised by the Estonian government after the intervention. A short time later the bank went bankrupt and was split in two parts, for this the EBRD gained a 25% share in the healthy part (Citadele) worth 25 million. This resulted in a loss of 57 million euro.

Estonia had to pay back the 57 million euro, but didn’t have the money. The only option was to take on more national debt, but since the country wanted to enter the Eurozone ASAP that wasn’t an option either.

No worries! Here’s investment company Nomura to the rescue. That company came up with a very well planned construction:
Estonia promised the EBRD to buy back the 25% in Citadele at the original 82 million €, AFTER it got permitted into the eurozone. However it would still not have the money to do so in 2014 and would still have to loan. But that loan would only come in the books in 2014 when they are already approved to the Euro. This is important because money loaned with the ESM as a Euro state does not show up on the national debt book, but still has to be paid back.

Two loads of European tax-payer money later Citadele (the split-off from Parex) is still doing what made Parex big: allowing Russians to launder their money in Europe. Right after all of this Citadele opened a branch in Switzerland called “AP-Bank”.

If a Russian wants to store his (criminal) cash in Europe now, all he has to do is pay €800 , deposit a bagload of cash and done. Citadele will then transfer that cash to AP-bank, because of Swiss regulations AP bank can then open bank accounts or make investments with this money abroad for said Russian Person while keeping their identity safe (it shows AP bank as owner).

This allows Russians to benefit from tax benefits abroad as well as hide their not so clean cash from their own treasury, all made possible with a loan funded with European tax payer money.

Sleep Tight

You can sleep on both ears. in April 2014 the European Comission published a press release stating that these transactions to save Parex were inexplicable. Commissioner for internal markets at the time, Neelie Kroes is also under investigation for corruption by the Dutch government. The EC also announced a full investigation, results are still underway.

More here: http://europa.eu/rapid/press-release_IP-14-454_en.htm