The findings, contained in a draft report commissioned by Denmark’s largest bank and seen by the Financial Times, raises questions for Danske’s leadership about who knew, and when, about the sheer volume of foreign money passing through its small Estonian branch.
The report by Promontory Financial, the consultancy, found that up to $30bn was parked in Danske’s Estonian branch by non-residents in 2013, the peak year of a scandal that lasted from 2007 until 2015.
It’s a truly breathtaking amount for such a small branch. You can’t have that amount flowing through without it raising questions
“NRP [non-resident portfolio] transaction volume peaked in 2013 with the number of transactions approaching 80,000 that year, and the transaction volume approaching $30bn,” the independent findings, seen by the Financial Times, stated.
One person close to the investigation said: “It’s a truly breathtaking amount for such a small branch. You can’t have that amount flowing through without it raising questions.”
Not all of those transactions will be suspicious. But it is up to the bank to satisfy itself — and regulators — that it was not being used to launder funds and that it had strong enough controls to spot dirty money.
“We take the matter very seriously, which is why we have initiated very extensive investigations,” said Ole Andersen, chairman of Danske Bank. “We are committed to understanding the full picture, and I believe that it is in everybody’s interest that conclusions are drawn on the basis of verified facts and not fragmented pieces of information taken out of context.”
“We are in the process of finalising reports, but as we have already communicated, it is clear that the issues related to the portfolio were bigger than we have previously anticipated,” he added.
The amount of suspicious transactions over the nine-year period was initially estimated at $3.9bn. Bill Browder, a critic of the Russian government, and Berlingske, a Danish newspaper, both claimed in July that the figure had risen to $8.3bn, causing Danske to concede that the final sum would be “somewhat larger” than the initial estimate.
Thomas Borgen, Danske’s chief executive for the past five years, was in charge of international banking — including Estonia — from 2009 until 2012. The findings raise questions about whether he knew about the large flows of money into Danske’s Estonian branch and what he did to investigate them.
The Promontory report added: “The volume then [after 2013] began to decrease, with an accelerated decrease following the receipt of the [Estonian Financial Services Authority investigation]…”
A 2014 investigation by Estonian regulators found “large-scale, long-lasting systemic violations of anti-money laundering rules”. It required the bank to clamp down on banking services to non-residents.
Other prominent money-laundering scandals include HSBC being fined $1.9bn by US authorities for laundering at least $880m of drug money as well as $660m of sanctions breaches. Deutsche Bank also paid $630m to US and UK regulators for so-called mirror trades allegedly used to launder $10bn out of Russia.
Danske Bank is due to publish two reports into the money-laundering scandal this month: one centred on the details of the suspicious transaction and the other into its governance.
*The article has been updated to reflect that Mr Borgen was in charge of international banking until 2012, not 2013
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