The European Banking Authority (EBA) is under heavy fire from European policymakers after the regulator closed an investigation into the €200 billion Danske Bank money laundering scandal. In prematurely shuttering the inquiry, the EBA ignored an internal report which had identified four breaches of EU law by the Danish and Estonian authorities who turned a blind eye to the dirty money flowing through the bank.

European Commission vice-president Valdis Dombrovskis lobbed some sharp criticism at the banking authority, telling the Financial Times that “it is disappointing that the board of supervisors of the EBA did not act on one of the biggest money-laundering scandals in Europe.”

The European Commission itself, however, has done that very same thing, neglecting to crack down on one of the most likely avenues for money laundering in Europe—the special tax zones known as “freeports”, which allow wealthy clients to store their luxury goods tax-free for extended periods of time.

Advertisement
Advertisement

A veritable cacophony of voices in Brussels has come out against these facilities—for their “extremely perfunctory controls” and the ease with which they could be used for nefarious purposes, from money laundering to holding terrorist groups’ looted antiquities.

A den of alleged fraudsters and thieves

European freeports—and one in particular, Le Freeport Luxembourg—have also received their fair share of criticism from policymakers for the rather dubious backgrounds of their top management, who have apparently insulted and threatened journalists trying to probe the facility’s secrets.

Advertisement

Among the motley cast of characters associated with Le Freeport Luxembourg: shareholders Olivier Thomas, who allegedly stole some of Picasso’s paintings from the artist’s own stepdaughter, and Jean-Marc Peretti, whose apparent links to illicit gambling circles and Corsican organised crime have raised more than a few eyebrows.

Then there’s founder and “freeport king” Yves Bouvier, who was forced to sell his family business after his legal troubles began piling up.

After rumours that Yves Bouvier had been involved in German forger Wolfgang Beltracchi’s fraudulent schemes, Bouvier’s former clients started suing the Swiss entrepreneur in courts around the world, accusing him of having defrauded them out of more than $1 billion in the “largest art fraud in history.” If that wasn’t enough, Swiss authorities became sceptical that Yves Bouvier was a genuine Singaporean resident and started looking into whether he might owe as much as CHF 165 million in back taxes.

Dirty Azeri money in the picture?

Now new concerns are arising, this time about the CEO of Le Freeport Luxembourg CEO, Philippe Dauvergne. A Forbes article published recently shed a light on Dauvergne’s deeply concerning ties with individuals and businesses connected with the infamous Azerbaijani laundromat. Dauvergne, a former French customs official, has embarked on numerous joint business ventures with Azeri businessman Khagani Bashirov, sitting together on the boards of firms from Cyprus to London.

Advertisement

Bashirov, in turn, is a close associate of Jahangir Hajiev —one of the key figures in the Azerbaijani laundromat according to the Organized Crime and Corruption Reporting Project (OCCRP)—and some of his companies may have partnered with the International Bank of Azerbaijan (IBA) as well as with firms involved in the laundromat. Hajiev was previously the chairman of the IBA, and much of the Azerbaijani laundromat funds flowed through the bank. Hajiev is currently serving a 15-year prison sentence for fraud, embezzlement, and misappropriation of public funds.

Advertisement

His wife Zamira Hajieva, meanwhile, made headlines for blowing a staggering £16 million at Harrods and becoming the first recipient of an Unexplained Wealth Order in the UK.

Troubling characters for a European freeport operator like Philippe Dauvergne to be linked to, indeed. While a spokesperson for Le Freeport told Forbes that they are unaware of any Azeri shell companies storing their ill-gotten gains in the Luxembourgish facility, the case has piqued the interest of Belgian authorities, who are reportedly looking into Dauvergne’s relationship with companies involved in the Azerbaijani laundromat.

Brussels can’t afford to be hypocritical

The revelation of Dauvergne’s problematic links with Baku has only intensified the urgent need to close the loopholes which may be allowing every type of financial fraud in the world to take place within EU freeports’ maximum-security vaults. The European Parliament is already acutely aware that cracking down on these zones must be a priority: MEPs like Portugal’s Anamaria Gomes came away from a visit to Le Freeport deeply concerned about the facility’s lax checks and likely use by money launderers and tax evaders.

Since then, the Parliament has put phasing out freeports at the top of its agenda. German MEP Wolf Klinz warned European Commission President Jean-Claude Juncker personally about the unacceptable risks associated with maintaining facilities “of Le Freeport Luxembourg’s reputational profile within the EU.”

He suggested that the Commission leader—and former Luxembourgish prime minister, under whose watch Le Freeport was built in the first place—has a moral and ethical responsibility to take a tough line on the areas which could serve as “crime blind spots”.

Perhaps unsurprisingly— given his history of obstructing EU efforts to crack down on tax avoidance— Juncker has rebuffed MEPs’ insistence that he squashes the Freeport model which Yves Bouvier popularised. Juncker is no doubt thinking, as he was when he amended Luxembourg’s tax laws to allow Le Freeport to be built, of the financial bottom line. But, as MEPs have underlined, the risks of hosting facilities so intrinsically linked with criminality greatly outweigh the benefits. It’s high time that the European Commission get with the programme the European Parliament has laid out, rather than talking tough on one instance of money laundering within the bloc and shutting their eyes to another.

Don't miss our page on Facebook!
Click to read more