The Chess Grandmaster Battling Latvian Money Laundering
WHY YOU SHOULD CARE
Can Finance Minister Dana Reizniece-Ozola outsmart Latvia’s money launderers?
By Dan Peleschuk
Pensive and composed, Dana Reizniece-Ozola eyes the chessboard in thoughtful silence. When you watch the 36-year-old grandmaster deploy her pieces — a swift advance of the pawn, or a sweep of the rook — it’s clear she’s also a master of strategy and rapid decision-making. Both of which come in handy for her life’s other pursuit: As Latvia’s finance minister, Reizniece-Ozola is leading the charge to vanquish a particularly vexing opponent.
In recent years, Latvia’s banking system has gained unwanted attention for laundering billions of dollars in dirty money from corrupt former Soviet republics. In most cases, says anti-corruption expert Liene Gātere, “their regimes are something we wouldn’t call a ‘democracy.’” Around half of the Baltic country’s 22 banks have traditionally accepted “nonresident” deposits — cash sent from often murky sources in countries like Russia, Ukraine, Moldova and Azerbaijan — before funneling them further into Europe.
In February, the U.S. Treasury Department accused Latvia’s third-largest lender, ABLV, of “institutionalized money laundering” and effectively forced its liquidation. Combined with censure from institutions like the Organization for Economic Cooperation and Development, Latvia’s reputation has taken a thrashing — and now it’s fallen on Reizniece-Ozola, a charismatic mother of four with serious political ambitions, to help repair it. Luckily, she’s not easily discouraged: “I’ve been very well trained by chess to stay focused,” she jokes.
When you get some suspicious money from a post-socialist country, good luck trying to figure out what the real source of that money is.
Valts Kalnins, University of Latvia
Born in western Latvia, Reizniece-Ozola was introduced to the game as a child. Attaining the status of Woman Grandmaster by the age of 21 — she currently ranks 184th in the world among active women — she was drawn into politics by a desire to help turn her country of 2 million from an ex-Soviet backwater to a prosperous European welfare state. Studying business in Finland, management in Spain and even briefly training in aerospace industry management, Reizniece-Ozola also collected an MBA from France’s International Space University before spending several years running a tech incubator on Latvia’s Baltic coast and, eventually, entering Parliament.
According to Igors Udodovs, a board member of the Ventspils High Technology Park, which Reizniece-Ozola led from 2006–2010, his longtime former colleague is perfectly suited for politics. “You don’t see many people with both a creative and systematic mind,” he says.
By the time Reizniece-Ozola reached the Finance Ministry in February 2016 after a two-year stint as minister of economics, money laundering had already become a national cottage industry. Dirty cash flowed into Latvia — a sort of post-Soviet gateway between Eastern Europe and the West — through local banks willing to cater to lucrative but mysterious clients; the banks then dispatched it to an intricate network of shell companies across the world. In one case, investigative journalists concluded that the Riga-based Trasta Komercbanka had received some $13 billion in cash over several years as part of a scheme reporters dubbed the “Russian Laundromat.” Not long after, ABLV found itself in the Treasury Department’s crosshairs, accused of laundering money that ended up funding North Korea’s nuclear missile program.
For years, Latvian banks, regulators and law enforcement officials proved either unable or unwilling to rein in the culprits. Even with the right intentions, the inherently complex nature of the crime requires mountains of resources and expertise. “When you get some suspicious money from a post-socialist country,” says Valts Kalnins, assistant professor of political science at the University of Latvia, “good luck trying to figure out what the real source of that money is.”
But with pressure mounting on Latvia to act, especially since the ABLV scandal broke, Reizniece-Ozola is now leading a multipronged effort to remove secretive, high-risk ex-Soviet clients from Latvia’s banking system. The objective is to have these accounts comprise no more than 5 percent of total business by year’s end — while also increasing institutional transparency. On this last point, both experts and Reizniece-Ozola warn that the entire system, from financial investigators to prosecutors and courts, must work in lockstep to root out would-be criminals. That hasn’t been the case in the past, says Gātere, who heads the Latvia branch of Transparency International.
An affable optimist inspired by the charisma of French President Emmanuel Macron and the technocratic skill of former German Finance Minister Wolfgang Schäuble, Reizniece-Ozola believes Latvia has already demonstrated its ability to pull itself out of dire situations. Before the world’s attention fixated on money laundering, the country was being hailed as one of Europe’s economic success stories. Hammered by the global financial crisis, it staged a remarkable turnaround: After its economy shrank nearly 20 percent by the end of 2009, Latvia was posting steady growth only two years later. “Every crisis gives you a chance for a better change,” Reizniece-Ozola says.
But even if international institutions are likely to applaud the course Reizniece-Ozola and her ministry are taking, a number of others aren’t. With parliamentary elections looming next month, Latvia’s leading business daily has launched stinging attacks against Reizniece-Ozola, accusing her of corruption, while other defenders of freewheeling finance — or supporters of the country’s chief pro-Russia opposition party, for that matter — might be similarly inclined to take aim at the minister.
Yet Reizniece-Ozola remains unfazed. To understand why, consider this: Despite a recurring nightmare in which she’s falling with a parachute, she’s added skydiving to her bucket list. “If you’re really scared of something happening,” she says, “you have to name it out loud.” In other words, the chess equivalent of a counterattack.
- Dan Peleschuk, OZY Author Contact Dan Peleschuk