INTERNATIONAL – Danske Bank’s chief executive Thomas Borgen quit on Wednesday in a money laundering scandal which involved $234 billion (R3.4 trillion) flowing through its Estonian branch between 2007 and 2015, most of which was suspicious.
“It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia. I deeply regret this,” Borgen said in a statement which detailed failings in compliance, communication and controls.
Regulators and the financial community will scrutinise the Danske Bank report, which follows calls by Brussels for a new EU watchdog to crack down on financial crime after a series of scandals involving anti-money laundering controls.
Dutch bank ING this month admitted criminals had been able to launder money through its accounts and agreed to pay $900 million to settle the case.
A third of Danske Bank’s stock market value has been wiped out in the last six months, mainly driven by concerns over a possible inquiry by US authorities and the penalties this could entail.
Danske Bank said its investigation into the affair concluded that Borgen, Chairman Ole Andersen and the board of directors “did not breach their legal obligations towards Danske Bank”.
While Danske said it was not able to provide an accurate estimate of the suspicious transactions through its Estonian branch, it said the non-resident portfolio included customers from Russia, Azerbeijan, Ukraine and other ex-Soviet states.
The report found that Danske Bank failed to take proper action in 2007 when it was criticized by the Estonian regulator and received information from its Danish counterpart that pointed to “criminal activity in its pure form, including money laundering” estimated at “billions of roubles monthly”.
And when a whistleblower raised problems at the Estonian branch in early 2014 the allegations were not properly investigated and were not shared with the board, Danske said.
While it took measures to get its Estonian business under control in 2014, these were insufficient, the report said.
Danske Bank also said it had decided not to migrate its Baltic banking activities onto its IT platform, because it would be too expensive. Accordingly, the Estonian branch did not employ Danske’s anti-money laundering procedures.
US authorities earlier this year accused Latvia’s ABLV of covering up money laundering and the bank was promptly denied US dollar funding, leading to its collapse.
While Danske does not have a banking license in the United States, banning US correspondent banks from dealing with it would amount to shutting it out of the global financial network.
The bank, whose shares fell as much as 5 percent following the release of the report, also lowered its expectations for annual net profit to 16-17 billion Danish crowns, from a previous range of 18-20 billion.