Investigations Reveal Danske Bank Estonia Funneled Nearly 200 Billion Euros in Largest European Money Laundering Scandal
The Estonian branch of the European bank conglomerate, Danske Bank, has undergone extensive investigation regarding recent connections to a nearly decade-long money laundering scandal. Beginning in the year 2007 and lasting until around 2015, reports conclude that Danske Bank Estonia served as the conduit for the funneling of nearly 200 billion euros through illegal money laundering via various non-resident customer portfolios. The allegations have aroused large concerns surrounding the consistency of implementation for European bank regulation policies and question the overall oversight and accountability measures regarding many major international banking institutions affiliated with the scandal.
A recently published report by Danske Bank inquiring into the scandal identifies a non-resident portfolio comprised of roughly 10,000 to 15,000 customers deemed to be associates of the transactions in question through the Estonian branch of the bank. From Danske Bank’s acquisition of Estonia’s Sampo Bank in 2007, these non-resident customers carried out 7.5 million to 9.5 million transactions through the Estonian branch, of which a, “significant part of the payments [in question are deemed] to be suspicious,” with approximately 6,200 of the non-resident portfolio customers exhibiting substantial correlation with the bank’s risk indicators.
A large part of the concern arising from this scandal is that Danske Bank Estonia could not have operated in isolation to conduct the mass-scale laundering that has been revealed. Much of the illegal money was transferred in U.S. dollars, alluding to the participation, either unwitting or not, of major banks with access to the U.S. Federal Reserve’s electronic settlement system in the Estonian-based scheme. These banks include J.P. Morgan, Bank of America, Deutsche Bank AG, and Citigroup’s Moscow based division. These institutions corroborated in the money laundering through a position termed as, “‘correspondent banks,’” in which they facilitated the, now illegally-originating, subsidiary transactions of Danske Bank Estonia’s non-resident portfolio customers.
The confounding nature of this prolonged scandal is the progressively developed awareness by many of these affiliated banks over the course of the 8-year long laundering operation, yet the subsequent dismissal and potentially speculated collaboration of various Danske Bank Estonia representatives. Starting in 2013, J.P. Morgan terminated its activity as a correspondent bank for the Estonian bureau of Danske Bank, alleging problems with the portfolios of the Estonian arm’s non-resident customers. It was not until 2015 that both Bank of America and Deutsche Bank ended their status as correspondent banks with the Estonian Danske Bank, and the present status of entanglement for Citigroup’s Moscow department is unclear. However, repeatedly throughout the nearly decade-long period, Danske Bank Estonia’s now late-Chief Executive Thomas Borgen was a key proponent of the continued stimulation and increased enhancement and volume of the Estonian division’s business with non-resident customer portfolios, despite the repeatedly arising accusations and withdrawals of the major correspondent banks. Notably, these portfolios centered on a sizeable populace originating from Russia and post-Soviet states.
The driving investigation sourced to the Bruun & Hjejle law firm suggests further implications in the responsibility behind the laundering. The results of their analysis propose that Danske Bank was not adequately aware of nor monitoring the subsidiary portfolios of its divisional customers, and that it is highly likely that various Danske Bank Estonia employees are connected to the fraudulent transactions. Interestingly, some of the main laundering perpetrators are deemed to be the Russian and Azerbaijan based “‘Laundromat’” operations.
In the proceeding examinations of the scandal, Russian authorities have yet to be duly consulted, despite the purported key role of some of its nationals in the non-resident portfolios. It is thought that approximately 23% of the illicit fund activity originated from Russia. Presently, it appears that Estonian and Danish officials are leading the investigative strides, with upcoming inquiries posed by the U.S. Department of Justice and the European Union. However, publicly Russian financial monitoring bureaus have pledged to support the forthcoming inspections if called upon.