Saturday

16th Nov 2019

Danish bank scandal grows to 'gigantic' proportions

  • One fifth of Danske Bank's share value wiped out as fines loom (Photo: danskebank.com)

Denmark's top bank handled up to €28bn of dodgy Russian funds in just one year, in what has the makings of the biggest money-laundering scandal in European history.

The latest chapter in the unfolding story was written by Promontory Financial, a US-based consultancy hired by Danske Bank to look into the affair.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 year's of archives. 30-day free trial.

... or join as a group

"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 [€28bn]," the consultancy said in a report seen by the Financial Times, a British newspaper.

A non-resident client is a person who lives in one region or jurisdiction, but has financial interests in another one.

Not all the money was likely to have been illicit, but all of it came from Russian or ex-Soviet republic clients and all of it flowed through Danske Bank's tiny branches in Estonia, which ought to have rung alarm bells at head office in Copenhagen.

Revelations first came out in Danish newspaper Berlingske in September 2017 that Danske Bank had handled €2.4bn of shady Azerbaijani money between 2012 and 2014.

Further revelations in July this year showed it had also handled €7bn of dodgy Russian funds between 2012 and 2015.

These funds were linked to the family of Russian leader Vladimir Putin and to the Russian intelligence service, the FSB, a Danske Bank whistleblower said.

Some of them were also linked to the murder of Russian anti-corruption activist Sergei Magnitsky, the activist's former employer, British businessman Bill Browder, said, in what he called "blood money".

The bank received warnings from Danish and Estonian regulators and internal watchdogs in 2012 and 2013, but it shut down the Estonian operation, dubbed a "laundromat", only in 2015.

The €28bn figure dwarfs all previous scandals of the type in modern times in Europe.

British bank HSBC was found in 2012 to have handled €760mn of Mexican drug cartel funds.

Germany's Deutsche Bank was also outed last year for having handled up to €9bn of shady Russian transactions.

But the Danish scandal was "gigantic" in scale compared to these, Browder said on Monday (3 September).

It involved "a truly breathtaking amount", a source linked to Promontory Financial's investigation told the Financial Times.

With branches on many street corners in Danish cities and with its head office in a historic building on Kongens Nytorv, the central square in the Danish capital, the affair has already cost the bank dearly in reputational damage.

Its share value has dropped by 20 percent over the past year and some of its executives, including Lars Morch, head of international banking, have resigned.

The shares fell a further 6 percent on Tuesday after the Financial Times report.

The costs are set to increase amid an ongoing investigation by Danish authorities as well as a criminal complaint against 26 of its executives filed by Browder earlier this year.

The US, which fined HSBC $1.9bn (€1.6bn) back in 2012, might also fine the Danish lender, given that Danske Bank has a US dollar bond programme and handled US dollar transactions in Estonia.

"We are following this case very closely," Marshall Billingslea, a sleuth at the US Treasury department, told Berlingske.

"We have a close cooperation with the authorities here in Denmark, as well as in Estonia," the US official said.

The bank itself has declined to take a position on what happened, pending the publication, due later this month, of its internal probe.

"The matter is very complex, and no conclusion as to the number of suspicious customers or transactions - or indeed the extent of potential money laundering - can be drawn from any individual pieces of information taken out of context," a Danske Bank spokesman said on Monday, reacting to the Financial Times story.

"It's completely natural that there is interest for the case in Estonia from different authorities, including the US," another bank spokesman told the Reuters news agency.

"We take the matter very seriously ... [and] we are committed to understanding the full picture," Ole Andersen, the bank's chairman, said.

News in Brief

  1. Catalan politicians extradition hearing postponed
  2. Germany: EU banking union deal possible in December
  3. EIB: no more funding of fossil-fuel projects
  4. UK defence chief: Russia could trigger World War III
  5. Hungary's Varhelyi will face more questions
  6. Police put former Berlusconi MEP Comi under house arrest
  7. MEPs criticise Poland for criminalising sex education
  8. UK will not name new commissioner before election

Stalling on VAT reform costing billions, says Commission

German media outlet Correctiv, along with other newsrooms, have revealed how criminals annually cheat EU states out of billions in VAT fraud. The EU Commission says solutions exist - but member states refuse to budge on tax unanimity.

Stakeholders' Highlights

  1. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  2. Nordic Council of MinistersNordic Climate Action Weeks in December
  3. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  4. Nordic Council of MinistersBrussels welcomes Nordic culture
  5. UNESDAUNESDA appoints Nicholas Hodac as Director General
  6. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  7. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  8. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  9. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  10. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  11. Nordic Council of MinistersNo evidence that social media are harmful to young people
  12. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021

Latest News

  1. Key moments for new commission This WEEK
  2. EU threatens legal action against UK over commissioner
  3. Corruption in the Balkans: the elephant in the room
  4. Green MEPs unconvinced by Romanian commissioner
  5. EU states fell short on sharing refugees, say auditors
  6. Hungary's commissioner-to-be grilled over loyalty to Orban
  7. Widow's plea as EU diplomats debate Magnitsky Act
  8. Leftist MEPs call on EU to address crisis in Chile

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Join EUobserver

Support quality EU news

Join us