The Estonian subsidiary of Denmark’s largest bank may have laundered more than double the amount of dirty money than first thought, according to reports.
Danish newspaper Berlingske reported that as much as DKr53bn (U.S. $8.3 billion) of suspicious funds are likely to have flowed through Danske Bank’s Estonian branch between 2007 and 2015. The bank had previously estimated that only DKr25bn of dubious money from sham companies in countries that included Russia, Azerbaijan, and Moldova had been funnelled through its Estonian operations.
In a statement, Anders Meinert Jørgensen, the bank’s head of group compliance, said it is “too soon” to draw any conclusions about the extent of potential money laundering in Estonia, which is “why we have not ourselves published figures or commented on speculations about potential amounts.”
Jørgensen, however, conceded that it appears the bank’s initial estimates may have been too low, and that the figure could grow. “On several occasions we have said that the extent seems to be somewhat larger than previously estimated,” he said.
“I cannot understand how such a colossal case has had almost no consequences for Denmark’s largest bank. It is the biggest money laundering case we have ever seen.”
Lisbeth Bech Poulsen, Member of Parliament
“Until the investigations launched have been completed in September, though, it would be wrong to speculate any further. But there is no doubt that even one krone laundered is one too many, and that we take this matter very seriously,” he said.
As part of an internal investigation, Danske Bank hired law firm Bruun & Hjejle to produce a report into what went wrong, due to be released in September. The bank has also said it is examining whether its Lithuanian and Latvian branches have been involved in money laundering, too.
The latest revelations have caused a political storm in Denmark. Denmark’s new business minister, Rasmus Jarlov, has called the alleged money laundering “a disgrace and a scandal” and has said that the bank’s internal investigation may not be sufficient.
Meanwhile, the Socialist People’s Party, Socialistisk Folkeparti, has demanded answers from Søren Pape Poulsen, Denmark’s justice minister, on whether the fraud squad will look into the case.
One of the party’s MPs, Lisbeth Bech Poulsen, told Danish newspaper Politiken: “I cannot understand how such a colossal case has had almost no consequences for Denmark’s largest bank. It is the biggest money laundering case we have ever seen.”
Danske’s AML failings laid bare
Last September Danske revealed that a root cause analysis performed by regulatory consulting firm Promontory Financial Group had found that three major deficiencies led to the branch not being sufficiently effective in preventing it from potentially being used for money laundering over a nine-year period from 2007 to 2015.
There was no proper focus on the risks of anti-money laundering at the Estonian branch, and nor was there a proper culture at the bank to raise awareness;
There was inadequate governance in relation to compliance and risk;
Management follow-up and control were highly dependent on local country management.
So far, only one executive—Lars Mørch, responsible for the bank’s business and international units—has resigned over the scandal.
A month after his resignation, Danske was reprimanded and severely criticised by Denmark’s financial regulator on 3 May for weak anti-money-laundering controls that led to suspected “criminal activities involving vast amounts of money.”
Jesper Berg, director general of the Danish Financial Supervisory Authority, said: “the bank acted too late on information concerning the lack of anti-money-laundering measures and on suspicion of criminal activities of customers, which it received from sources that include an internal whistleblower.”
He added that “the bank’s governance has not ensured that the problems in Estonia have been handled in a satisfactory way, including by reporting suspected crime to the relevant authorities.”
The Danish FSA also ordered Danske to set aside DKr5bn in capital to cover compliance matters but added that there was no basis for initiating legal proceedings against current management or other employees at the bank for the failings.
Later that month, both the Danish and Estonian financial regulators were forced to issue a joint statement to make clear that they understood what their supervisory responsibilities were in regard to tackling money laundering.