For years, the Estonian branch of the Denmark-based Danske Bank ignored repeated warnings about specific clients and the source of their money.
The warnings came from regulators and government officials alike — even from the Russian Central Bank. Now, more than a decade later, we’re just beginning to understand the total cost of the bank’s unwillingness to heed any concern about its clients and the source of the billions the bank was helping launder.
This week, Danske Bank, Denmark’s biggest lender, released the findings of an investigation into the Estonian branch’s work from 2007 to 2015. The conclusions were staggering. The bank revealed that it had handled over $230 billion in that time period, a significant percentage of which was suspicious — representing, as the Financial Times noted, “one of the largest money laundering scandals ever uncovered.”
All told, the bank investigated some 15,000 non-resident clients and nearly 10 million payments, as well as over 8 million emails. Focusing on over 6,000 of the non-resident clients in particular, the “vast majority have been found to be suspicious,” according to the investigation.
Perhaps the most damning aspect of the entire investigation? The bank still has no idea exactly how many clients poured tens of billions of dollars through the bank in order to clean the cash. As the bank wrote, “We are not able to provide an accurate estimate of the amount of suspicious transactions.”
Heads have already begun to roll. On Wednesday, Danske Bank CEO Thomas Borgen announced his resignation. “Even though the investigation conducted by the external law firm concludes that I have lived up to my legal obligations, I believe that it is best for all parties that I resign,” Borgen said.
The bank also announced that over 40 “employees and agents” were “involved in some suspicious activity” regarding the transactions, and reported these employees to Estonian authorities. The bank described the employees’ actions as potentially fitting the bill of “internal collusion.”
“It is good that Danske Bank has published this investigation, but the fact that they ignored thousands of high risk accounts for years demands accountability,” wrote pro-transparency watchdog Global Witness in an analysis.
Global Witness analysis points to the importance of centralized EU anti-money laundering oversight in the wake of massive Danske Bank scandal. See ASD’s earlier post from @JoshKirschGMF on the importance of aggressive fines. https://t.co/wTvBYVy6B9 https://t.co/Hhjnkkf1iX
— Securing Democracy (@SecureDemocracy) September 20, 2018
The fallout, though, has just begun. Given that the bank has still failed to identify all of the suspicious transactions in particular — and the fact that American authorities recently announced an investigation into the bank — further information on which officials, politicians, and businessmen were using and abusing Danske Bank’s lax oversight is likely forthcoming.
But the bank did reveal that numerous clients appeared linked to some of the most notorious other money laundering operations of the past few years. For instance, the bank wrote that some 75 customers were involved in the “Azerbaijani Laundromat,” the primary money laundering scheme from Azerbaijan’s dictatorship.
And Bill Browder, the former hedge fund manager who has become one of the primary activists behind new sanctions against Russia, has long alleged that Danske Bank played a key role in helping launder proceeds from a tax scheme that Browder’s former accountant, Sergei Magnitsky, uncovered. Magnitsky was later killed while imprisoned by Russian authorities for uncovering the scheme; the U.S.’s Magnitsky Act, which sanctions corrupt Russian officials, is named in his honor.
This is truly shocking. After being at the helm of the bank with the biggest money laundering scandal in European history, Danske CEO Thomas Borgen will still receive a bonus of €2.8m-€3.6m https://t.co/KlJWoob0OG
— Bill Browder (@Billbrowder) September 19, 2018
BREAKING: From the Danske Bank Russian money laundering report. 42 employees and agents have been involved in suspicious transactions. 8 have been referred to the Estonian police pic.twitter.com/xqDJROwEnZ
— Bill Browder (@Billbrowder) September 19, 2018
Ironically, one of the most notable warnings about the Estonian branch’s money laundering operations came not from Western partners, but from the Russian Central Bank. In 2007, the Russian Central Bank warned Danske about possible “criminal activity in its pure form, including money laundering.” The Russian Central Bank estimated that the Estonian branch may have been laundering “billions of rubles monthly.”
Years later, according to the Wall Street Journal, Danske Bank’s anti-money laundering head identified a number of clients at the Estonian branch who had been placed on the Russian Central Bank’s blacklist. Danske Bank, though, appears to have done nothing about it — and we still have no idea how much money was laundered in the interim.