This week, we learned of the disappearance and subsequent death of Aivar Rehe, once one of Estonia’s most prominent bnkers, and the chief executive of the Estonian subsidiary of Danske Bank. It was under his watch that the billions of dollars were laundered through the bank, which became known as the biggest money laundering scandal of our time. Unfortunately, Mr. Rehe was not the only causality of the scandal. According to leaked U.S. diplomatic cables, Andrei Kozlov, the former Deputy Governor of Russia’s central bank, was allegedly murdered in 2006 after blowing the whistle on Russian money laundering at Sampo Bank, which was acquired by Danske the following year. Perhaps the most notable victim of the scandal is Sergei Magnitsky, a lawyer to financier turned activist Bill Browder. Before his murder, Magnitsky had blown the whistle on the alleged theft of $230 million by tax officials, which was subsequently laundered through Danske and Swedbank, among others. Browder’s advocacy for Magnitsky ensured the passage of 2012 Magnitsky Act, which authorizes the U.S. to sanction those involved in the corruption and subsequently expanded to human rights violations anywhere through the 2016 Global Magnitsky Act.
Notably, Browder was successful in his advocacy as the foundation was built by the 2004 Presidential Proclamation 7750, which allows the State Department to covertly declare suspected kleptocrats and their family members ineligible for entry to the US. However, the proclamation was not widely known and rarely used as Browder had discovered. The Magnitsky acts became the greatest thorn in kleptocrats everywhere, as versions of the legislation were enacted in Estonia, Lithuania, Latvia, the United Kingdom and Canada. The acts proved to be a stronger deterrent than the fines imposed by the Foreign Corrupt Practices Act and the recently introduced Foreign Extortion Prevention Act. The increasing complexity of legislation, and the powers they confer, complicate efforts for financial institutions to comply. Would a bank in Germany necessarily know that an individual transacting through its institution is sanctioned by national legislation for crimes in Estonia? Probably not, which is why increased transparency by on the part of governments coupled with the innovation through Regtechs has never been more vital in the fight against financial crime.