Despite that digital payments are on the rise, cash continues to play a significant role in global criminal activities, including money laundering, due to the anonymity it provides for transactions.
The findings of the assessment suggest that the travel restrictions accompanied by the Covid-19 pandemic and the full-scale war between Russia and Ukraine in 2022 have significantly reduced the cash inflow from Russia to the Baltic States. However, a considerable flow of cash remains across the external borders of all three Baltic countries, in the case of Estonia to the United Kingdom. In Lithuania, the growth of the fintech sector has also influenced cash volumes.
"The results of this collaborative assessment align with the Estonian Financial Intelligence Units study on cash-related risks, which assessed the situation in Estonia in more detail. Money laundering and related criminal activities are a cross-border phenomena, and cooperation with other countries is becoming increasingly more important in combating them, conducting such joint studies is a part of doing so," said Toomas Plaado, the deputy head of the Financial Intelligence Unit. "We notice a trend where physical and legal persons in Estonia use accounts issued by Lithuanian payment service providers for cash transactions, partly, presumably, for the purpose of concealing income," Plaado added.
Trends in cash movement indicate that the Baltic States are primarily used for cash transit, but there is also a risk associated with the use of cash to launder income obtained from the shadow economy and other criminal activities.
The recommendations of the study for reducing risks of cash-based money laundering include increasing awareness and harmonizing legislation. Further studies would help in gaining a consistent understanding of the trends in the use of illicit cash. Collaboration and data exchange among financial intelligence units, investigative institutions, and other partner organizations play a significant role. Additionally, it is essential to continue harmonizing regulations for money laundering prevention, which helps reduce the risk of criminals exploiting countries and sectors with weaker regulations.
This strategic assessment is the first joint project of the Estonian, Latvian, and Lithuanian financial intelligence units that portrays the risks associated with illicit cash in the Baltics.
