Slovenia’s state prosecutor has opened a preliminary investigation into claims that the country’s largest lender, state-owned Nova Ljubljanska Banka (NLB), may have laundered nearly €1bn from Iran between 2008 and 2010, breaking an international embargo and failing to enforce rules on the financing of terrorism, according to Euraktiv.  

The scandal has escalated at a delicate moment for NLB, which is due to be privatised shortly. Slovenia is obliged to sell off NLB, which was nationalised in a banking sector bail out in 2013, under its commitments to the European Commission. Plans for an IPO were dropped in June amid a dispute over the pricing of the offer, but the privatisation is still expected even if the commission extends its original deadline of end-2017. 

The investigation centres around Iraj Farrokhzadeh, who holds joint Iranian and British citizenship. Farrokhzadeh reportedly who opened accounts at NLB in December 2008 for the company Farrokh Ltd., after the Swiss authorities shut down his accounts at UBS. 

Farrokhzadeh is thought to have moved money for Iran’s Export Development Bank (EDBI), which was blacklisted by the European Council over its connection to weapons proliferation and payments to front companies run by Iran’s ministry of defence. In addition, Farrokhzadeh himself was on Interpol’s most wanted list at the time, Euraktiv reported.

In late September, Prime Minister Miro Cerar confirmed to the parliament that the state prosecution had launched pre-trial procedures, but still had to confirm or reject the existence of grounds to suspect money laundering.

Two months earlier, Slovenian media had reported that 40-50 transactions took place every day from NLB bank to more than 30,000 accounts around the world, including some clearly held in fake names, such as Donald Duck and Mickey Mouse. 

The allegations were not further elaborated until the opposition reopened the case during the last week of September. On September 26, parliament unanimously adopted two reports calling for further investigation into the case.

Slovenia is the most prosperous country in the Wester Balkans, and is considered to adhere most closely to the rule of law, as a long time EU and Nato member. The news that Slovenian NLB — which is active in several countries in the region — could be a part of a scandal on such a scale has surprise many throughout the region.

However, according to the Council of Europe’s expert committee on money laundering and the financing of terrorism’s (MONEYVAL) latest report on Slovenia published in August, the number of money-laundering investigations has risen in Slovenia since the last evaluation in 2010. Even so, it is still not commensurate with the number of investigations and convictions for proceeds-generating crimes, such as tax evasion, fraud and other economic crimes, as well as drug trafficking. 

The report also says that banks in Slovenia have a sound understanding of the major sector specific money laundering risks, and measures to mitigate them are largely adequate. However, the degree of risk awareness varies among other financial institutions, while other relevant professions (e.g. lawyers, notaries, trust and company service providers) lack understanding of the extent to which they are exposed to money-laundering risks.