The recently leaked Pandora Papers – a huge trove of documents disclosing offshore bank accounts, tax evasion and money laundering – revealed massive corruption in many European countries. The Prime Minister of the Czech Republic, the President of Ukraine and many others are said to be involved. Such corruption eats away at the body politic of US allies and even threatens their security.
In Eastern and Central Europe, where countries from the Baltic Sea to the Black Sea face a recalcitrant Russia, corruption softens the stance of politicians towards Moscow, undoes the social fabric and pushes voters to opt for political extremes. This opens up politicians to involvement in shady organized crime syndicates and blackmail by Russian intelligence services.
Transparency International, an anti-corruption watchdog, has identified Albania, Bulgaria, Latvia, Moldova, Romania, Serbia and Ukraine as the main sites of corruption along Russia’s western periphery. , each in its own way. The massive Danske Bank money laundering scandal (involving some 200 billion euros) led by the bank’s Estonian branch and involving financial flows from Russia shattered all previous corruption records in Europe. It affected several countries in the region, including Estonia and Latvia, allies of NATO.
Anti-corruption efforts too often deteriorate into political settling of scores and power grabs. In Romania, another NATO ally, President Klaus Iohannis sacked Laura Codruta Kovesi, the country’s chief anti-corruption prosecutor, when she became too politically dangerous.
In Ukraine, former President Victor Yanukovych tried to make the country his family’s commercial stronghold and a Russian satellite. He was swept away by the Euromaidan revolution in 2014. His successor, Petro Poroshenko, was accused of massive corruption after the Panama Papers, published in 2016, revealed that he had created an offshore company. In April, President Volodymyr Zelensky’s cabinet fired Andriy Kobolyev, managing director of US-backed Naftogaz, prompting the resignation of Naftogaz’s supervisory board, endorsed by Western donors. A more flexible Yuri Vitrenko has become the new CEO. The supervisory board has since been sacked on September 27 by Zelensky.
After visiting President Joe Biden a month ago, Zelensky is promoting an “anti-oligarch law” that opponents say could easily turn into a witch hunt. Anyone with wealth and holdings in the media could be blacklisted by the president-controlled National Security and Defense Council and denied free speech or property rights without due process. Zelensky purged Dmytro Razumkov, a well-known speaker of parliament, from his own party for criticizing the law. The vitality of Ukrainian democracy and the transparency of its policy are now called into question.
Latvia is another worrying case. It lies in northwestern Russia and 25 percent of its population is ethnically Russian. Latvian banks were suspected of being linked to money laundering, Russian capital flight and corruption.
After the country came under pressure from the United States and the EU to clean up, it took several measures to fight corruption: its largest foreign banks were placed under the supervision of the Bank central EU, and some have been dissolved. Yet the country still suffers from ill-organized attempts to demonstrate anti-money laundering efforts, which appear to have backfired.
Jelena Kvjatkovska, a lawyer based in Riga, accused the leaders of the Latvian Financial Intelligence Unit of ignoring applicable constitutional standards, criminal procedure and rules of evidence in their attempt to speed up corruption cases. Judges with no experience or the necessary economic and financial training were appointed to hear complex cases of which they had no idea.
This haste to continue has led to the conviction of innocent people while senior officials are still at large. Few of the cabinet members or other insiders have been convicted – the courts, in fact, have exonerated senior officials. Kvjatkovska raises the controversial case of a real estate sale involving the family of Latvian Prime Minister Arturs Karins. The case was closed by the Latvian police, who concluded that Mr. Karins and members of his family had not committed any wrongdoing.
In a more notorious case, the Financial Crimes Enforcement Network, the anti-money laundering arm of the US Treasury, has taken legal action against Ilmars Rimcevics, a former president of the Latvian Central Bank accused of corruption. However, earlier this year the Latvian Anti-Corruption and Prevention Bureau dropped the case for lack of evidence.
U.S. financial law enforcement and regulatory authorities can help balance these countries’ anti-corruption efforts. They can provide technical assistance, training and other forms of assistance to their Eastern European counterparts. Constitutional protection of the rights of the accused, the rules of criminal procedure and evidence must be observed, and inexperienced judges should not rule on complex business, banking and foreign exchange matters.
If corruption and money laundering are to be wiped out to strengthen the security and resilience of our allies in Eastern and Central Europe, it must be done by fostering respect for the rule of law and strengthening post-European societies. Soviets in the face of threats from the East.
Ariel Cohen, Ph.D., is Principal Investigator (Non-Resident) at the Atlantic Council and Director, Energy Growth and Security Program at the International Tax and Investment Center (iticnet.org)
The opinions expressed in this article are those of the author.