Danske Bank money laundering scandal
The Danske Bank money laundering scandal arose in 2017-2018 around €200 billion of suspicious transactions that flowed from Russian and Azerbaijani sources through the Estonia-based bank branch of Denmark-based Danske Bank from 2007 to 2015. It has been described as possibly the largest money laundering scandal ever in Europe, and as possibly the largest in world history. In the context of the scandal, the OCCRP organization characterized Danske Bank as "a key enabler in the Azerbaijani Laundromat, a general-purpose money laundering scheme and slush fund used by the ruling elite in Baku."
Danske Bank, headquartered in Copenhagen, is the largest bank in Denmark. The bank's local branch in Estonia, which was acquired by Danske Bank as part of a merger with Finnish Sampo Bank in 2007, was used for the activities. It was under the jurisdiction of both the Financial Supervisory Authority of Denmark (due to the location of the headquarters) and the Financial Supervisory Authority of Estonia (due to the location of the branch), and both have blamed the other side for deficiencies. The Danish and the Estonian supervisory authorities later released a joint press release on collaborating and sharing information on the case. Both were allegedly criticized in a draft prepared by the European Banking Authority, an EU banking watchdog controlled by the national financial supervisory authorities of EU members states. However, the EBA closed its investigation early and did not publish the findings – a decision that itself caused criticism.
In 2007, the Estonian Financial Supervision Authority came out with a critical report on the Danske Bank's activities. In 2013, the first whistleblower disclosed that Danske's branch in Tallinn was knowingly dealing with funds from the family of the Russian President Vladimir Putin (his cousin Igor Putin) and the Russian security service (FSB). The claims were not properly looked into and hence did not catch enough attention.
The local Estonian branch of Danske Bank, after being acquired in 2007, still used its own IT-system and many documents were written in Estonian or Russian. Despite these difference in systems and language, the Danske Bank did not implement changes that would make it easier to control for the headquarters in Denmark. In a 2018 report released by Bruun&Hjejle, a law firm retained by Danske Bank, the bank claimed to have had believed for a "long time" that the high risks represented by non-resident customers were mitigated by proper Anti-Money-Laundering procedures. It had become clear that the AML procedures were not sufficient after being tipped off by an internal whistleblower. The whistleblower was later identified as Howard Wilkinson, former head of trading for Danske Bank in Estonia, Latvia & Lithuania
According to the Danish FSA, non-resident portfolios from Russia in 2012 made up 35% of the profits of the local branch. The overall percentage of Russian clients in the branch was 8%. Some of these transaction have been linked to the Russian Government and were done via shell companies that were registered in the United Kingdom, Cyprus and New Zealand, as well as other banks in Latvia and Moldova. The second highest amount of non-resident portfolios were from the United Kingdom. Another significant non-resident portfolio has been linked to the President of Azerbaijan and his family.
In 2013, US bank JPMorgan Chase halted its services to the Estonian branch of the bank, suspecting it was laundering large amounts of Russian money. Other banks continued providing services into 2015.
In 2014, The Estonian Financial Supervision Authority found "large-scale, long-lasting systemic violations of anti-money laundering rules" in the Estonian branch of Danske Bank and notified the Danish authorities on the findings. According to the Estonian Financial Supervision Authority, the activities decreased after they requested the bank to target the violations.
Ten former employees in the local branch of the bank were arrested by Estonian authorities in December 2018, and the bank was required by the Estonian government to close its Estonian branch in 2019.
The CEO Thomas Borgen resigned in 2018 following the scandal and was charged for neglecting his responsibilities by the Danish authorities in May 2019. At the same time, Henrik Ramlau-Hansen, the bank's former finance director, was charged by Danish prosecutors for not preventing the suspicious transactions. The Danish Parliament introduced new laws that increased the penalties for money laundering eight-fold, making them some of the toughest in Europe.
Danske Bank had the value of its shares cut in half in 2018. The Danske Bank has said they will donate 1.5 billion kroner (c. US$225 million) to a charity and the bank is expected to receive fines of several billion dollars by financial regulators in Denmark, other European countries and the United States.
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