Paradise Papers | Nemea took €10 million deposit from Azerbaijani when ECB suspended bank’s licence

Whistleblower told ECB of suspicious activities when Maltese company deposited €10 million on behalf of Azerbaijani woman in Paris

Nemea Bank owners Heikki Niemela and Mika Lehto
Nemea Bank owners Heikki Niemela and Mika Lehto

A €10 million deposit from an Azerbaijani-owned company in the now shuttered bank Nemea, was one of the reasons why the European Central Bank ordered the suspension of the bank’s Malta licence.

The Paradise Papers have revealed that a Nemea Bank employee reported suspicious activities at the bank to the ECB, and that the ECB had taken interest in an Azerbaijani company’s deposit – according to Finnish newspaper Yle.

The online-only bank went under administration in 2016 when the ECB instructed the Malta Financial Services Authority to place the bank’s assets under controllership. At the time, the bank’s directors also included former prime minister Lawrence Gonzi and financier Joseph F.X. Zahra, at the time also heading a special finance commission for the Vatican by Pope Francis.

Yle reports that a bank whistleblower told the ECB that Nemea was not complying with the terms of its licence.”

The Paradise Papers reveal that a single €10 million deposit was placed into a Nemea account by an Azerbaijani woman, when most of Nemea’s deposits were just a few thousands euros. The deposit was carried out by a Maltese company owned by a Luxembourg company, whose ultimate ownership rests with an Azerbaijani woman residing in Paris.

The firm that processed the transaction is Malta company Nila International Services of Naxxar, which is owned by Luxembourg company Vortex International (99%) and Isola Holdings in the Seychelles (<1%). Nila’s directorship is however invested in a BVI company called Alfred Management Ltd.

The MFSA is also reported as having drawn attention to the fact that Nemea had also granted loans to bank owns Mika Lehto’s and Heikki Niemela’s own companies in Finland, using depositors’ cash.

In April 2016, the MFSA wrote to the Nemea owners demanding that the bank’s capital be raised by €3 million or risk losing its licence.

The Paradise Papers revealed a receipt of a €3 million transfer to Nemea from the account of billionaire Antti Herlin’s asset management company Security Trading Ltd, used for Nemea’s recapitalisation.

But this transaction came over a suspicious land transfer that is now the subject of a police investigation.

Police report over land sale

Nemea attempted to quickly acquire €3 million in capital by selling off land in Finland to Antti Herlin’s holding company, Security Trading Ltd.

The land was owned by the company Langvik South, which is partly owned by Nemea. But other shareholders reported Lehto to the police for unilaterally carrying out the sale without their consent. Lehto denied that Nemea had any questionable dealings, saying the bank was the target of the MFSA’s witch hunt.

Nemea’s subsidiary Revestor owned 50% of the company Langvik South, the proprietor of nine properties and 78 hectares outside Finnish capital Helsinki. In May 2016, Langvik was sold to the billionaire Antii Herlin for €8.5 million, with Herlin committing to pay €1.5 million in cash and assume €7 million in outstanding liabilities.

But one of the four shareholders of Langvik – Mikko Pyykko – told Yle that Nemea’s owner Mika Lehto unilaterally signed the sale with a proxy on behalf of the other owners. Pykko said he had no knowledge of the sale.

“Mika Lehto had no credentials to handle this deal. He just signed his own name over the place left for mine. I find it a little perplexing that the buyer, Antti Herlin’s investment firm Security Trading, did not bother to make a local call to ask a minority shareholder if the prerequisites for the deal were on the up and up,” Pyykkö told Yle.

In the autumn of 2017, shareholders of Langvik South filed a police report into the illegal sale.

Lehto has said the previous owners knew about the deal beforehand. “The claim is entirely false and not true. The transaction was arranged with the largest of the minority shareholders’ full knowledge of the deal.”

Antti Herlin is the owner of Finnish lift and escalator firm Kone and one of Finland’s richest men.