Money laundering and drugs in Romania and Spain


by David Malone

I was in Timisoara Romania last week. Timisoara is a city of roughly 320k people on the Western edge of Romania. On the drive in to the city I was struck by the huge number of different banks I kept passing.

From one corner of the central square eight different banks were in sight of each other: RBS, UniCredit Tiriac, GEC Bank, CITI, Banca Transyvania, JTP Bank, ING, Volksbank and BCR (which is Erste – the Austrian bank). Elsewhere in the small city centre I also noted Raiffeisen Bank (another Austrian), BRD (which is actually Societe General), Piraus Bank (Greek).  I also noted both PriceWaterhouseCoopers and Deloitte.

Now Timisoara is one of Romania’s larger cities, though still only 320K. It does also have half a dozen international manufacturing plants.  So by Romanian standards it is affluent.  However, nice as it is to have manufacturing in a city, it does not make everyone rich.  So you do have to ask why quite so many banks? Surely they are not all there to compete for the deposit business of the city’s working class, nor even of their more well paid managers?  When I asked a group of a dozen of the city’s affluent professional class about the number of banks, they smiled and said, didn’t I know it was because everyone in Timisoara was so very rich. So I did a little poking around and found this rather timely article in the EUobserver reporting on this study from EUROPOL which is itself the distillation of 70 000 pages of intelligence from different police forces gathered over the last two years. The headline of article and report is that,

“Southeastern Europe is becoming the main gateway for smuggling drugs, guns and people into the EU….”

By Southeastern Europe it means mainly Albania, Romania, Hungary and Ukraine. The article notes that Romania and Hungary are a principle focus of drug smuggling because of their long and poorly policed borders and their application for admittance to the Shengen group of nations which allows passport free travel between member countries. I spoke to a Romanian journalist who readily confirmed what I had previously been told, that Romania has become a major route for Heroin transport into Europe. Coming ashore in the Black Sea and then moving by road – the so called Black Sea Route, is central to Heroin and increasingly for Cocaine into Europe. From Romania the drugs have then to pass through Hungary before getting to Austria and the beginning of the affluent markets for drugs. Timisoara is the last city before crossing the border into Hungary.

Wherever there are drugs there have to be banks in which to put the profits. Banks don’t like such insinuations of course. But on the other hand the is no getting around the fact that there would be no viable drug business if the money could not get into the financial system. One way or another banks DO launder all the world’s drug money. The first and most difficult part of the laundering process, ‘placement’, is getting the cash in to a bank. Once in, its a matter of disguising it’s provenance. By far the best way of placing dirty money is to have a willing business or bank, or both.

There are a lot of banks in Timosoara. What is more a lot of those banks are owned by and part of European banks – especially our friends the Austrian banks. In fact if you look at the ownership links of Austrian and Greek banks (See Piraus Bank for example) you see a clear pipeline running from Ukraine westwards to Romania and Austria.

This is no kind of proof of course, but it did set me to looking under more rocks. And under one I came across this business which says it specializes in creating Financial Trusts in, among other countries,  Romania.  Now Financial Trusts and Foundations are JUST the kind of thing which a friendly broker or Lawyer can set up in order to accept and hide dirty money.

The same company helpfully lists the countries in which it can facilitate setting up Trusts  and Foundations:

Corporation formation in: Switzerland, Cayman Islands, British Virgin Islands, Thailand, Ireland, Holland, Hungary, Mauritius.

Trust formation in: Switzerland, Holland, Cayman Islands, British Virgin Islands, Nova Scotia, Belize, Isle of Man; and Partnerships, Scotland.

Foundation formation in: Switzerland, Curacao, Liechtenstein, Panama;

I couldn’t help noticing Ireland making its appearance among the big boys of Cayman Islands, BVI, Switzerland, Liechtenstein and Panama.  (For those who are surprised at Panama, don’t be. The links between Panama and Israel are the really interesting ones. Panama is a hub for arms and laundering)

As I say none of this is anything but innuendo and supposition. But you do have to wonder at a small city stuffed to the gills with banks from Western and Southern Europe.

It reminds me of the tiny and very much contested Spanish enclaves of Ceuta and Melilla in Morocco. They are home to about 65K people each and are both very poor with high unemployment.  They are also a focus for illegal immigration. So why would Spain hang on to them despite Moroccan anger, Muslim unrest and constant problems with illegal immigrants?

Well if you look them up Melilla has seven different Spanish Banks including branches of Santander, BBVA and Banco Popular which also advertises its services for Private Banking customers wishing more discrete private banking arrangements in Melillo. The place is dirt poor!  Ceuta also houses seven banks.  In neither place is there conceivably a demand from the local populace for two never mind seven banks.

What are they all doing there? According to Wikileaks papers from the American Embassy in Morocco and the Moroccan government the enclaves are major routes for Cocaine coming into Europe from South America.  The route as far as I can tell comes ashore in Angola, goes cross country and leaves for Spain from Ceuta and Melillo. The two enclaves are also a route for Hashish. Once the drugs are about to head into Europe there is going to be the need for a lot of banking. And all those Spanish banks just happen to be there.

The poor old Portuguese could really do with some cash for their banks but being only in Angola they would only get a poor share.

Banks launder money. They do so knowingly. They claim not to of course. But the evidence is that they are  drawn to the very places where there is money in dire need of laundering. In so doing they are central to the drug crime business. They enable and enrich the most violent criminals. And they do it for profit.


David Malone is the author of the book Debt Generation. You can read and listen to excerpts from his book here: