An overview of the Danske Bank money laundering scandal

Berlingske has spent more than a year investigating the extensive money laundering at Danske Bank. Here is an overview of the case – with links to the most important articles (some are in Danish).

Berlingske has spent more than a year investigating the extensive money laundering at Danske Bank. Here is an overview of the case – with links to the most important articles Fold sammen
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For years, large and deeply suspicious money flows were channelled unhindered through Danske Bank’s branch in Estonia – in what experts say was in breach of anti-money laundering laws.

These suspicious transactions appear to have been used by the family of Russia’s President Putin, the Russian intelligence service, and the Azerbaijani regime. It also emerged that the bank’s top management was warned of suspected breaches early on, and that staff at Danske Bank Estonia acted consciously and actively to protect shady clients from authorities.

Throughout 2017 and 2018, Berlingske has worked to expose the money laundering at Danske Bank as one of the biggest banking scandals in Danish history. Below is an overview of how the case has developed, with links to essential articles.

Massive money laundering through Danske Bank and Nordea

The first chapter in the money laundering case started in March 2017, when Berlingske joined with the journalism organisation OCCRP, Russian daily Novaya Gazeta and other media outlets to reveal how substantial amounts of money had passed unhindered through Danske Bank Estonia and rival bank Nordea in Copenhagen, without these banks verifying the clients and transactions involved, as required by international anti-money laundering rules.

Berlingske later uncovered how the same Danish bank also appeared to have played a role in two spectacular international crime cases involving money laundering and corruption in Russia and Italy.

It also emerged that Danish authorities received a detailed warning from a reputable British law firm concerning money laundering through these Danish banks as early as 2013.

Regime channelled money through Danske Bank

The next chapter in the money laundering case began in September 2017, when Berlingske dug deeper into client files from Danske Bank Estonia to reveal that the Azerbaijani regime had used accounts in Danske Bank Estonia to channel money to European politicians and officials, as well as to tax shelters and to pay for luxury consumer items.

While other banks – including a small Italian savings bank – flagged and responded to some of these suspicious money transactions, Danske Bank apparently overlooked a whole string of obvious signs of money laundering.

These revelations followed a leak of data to Berlingske which was subsequently shared with a number of other media organisations. More on the methodology used can be found here (in Danish).

The case quickly led to repercussions for politicians, business people and authorities across the European continent and continued to send shock waves through European political circles for weeks after. In Azerbaijan, thousands of citizens took to the streets to protest against the regime.

The case, which was shared with a number of European media organisations as the »Azerbaijani Laundromat«, led Danske Bank CEO Thomas Borgen to launch a thorough review of the money laundering issues raised, following Berlingske’s revelations that the extent appeared to be »worse than feared«.

What did the bank know?

It was subsequently revealed by Berlingske that Danske Bank’s management in both Estonia and Copenhagen had received strong early warnings on suspected money laundering in the Estonian branch – and that the top management in Copenhagen had even been warned by the bank’s own internal auditor that staff at the branch were wittingly and actively hiding shady clients from authorities.

Former staff at the Estonian branch also told of having to deal with secrets and threats on a daily basis.

Despite these warnings in both 2013 and 2014, it took the bank more than 18 months to clear out the suspicious clients in Estonia. Not until late 2015 did the bank finally shut down the problematic portfolio of clients. By then the bank had received a reprimand from Estonian regulators for dragging its feet.

It later emerged that both the Danish financial regulator, Finanstilsynet, and Danske Bank’s own legal department were aware of suspicious Russian clients at the Estonia branch as early as the beginning of 2012, when the suspected laundering of billions of kroner was its height.

Links to Putin family and FSB

The case has since been shown to have spectacular links to the power elite in Vladimir Putin’s Russia.

One of the earliest warnings sent to the Danske Bank top management came from an executive with the bank in December 2013, alerting the executive board to suspected breaches of anti-money laundering rules in the Estonian branch. According to this whistleblower, a number of companies with accounts in the branch were allegedly controlled by »the Putin family and the FSB«, the latter being the Russian intelligence service.

This whistleblower alert was sent to four highly placed executives in Danske Bank.

The Danish financial regulator also subsequently started to look into the case, though only after the head of the regulator, Henrik Ramlau-Hansen, had declared a conflict of interest in the case due to having been a member of Danske Bank’s executive board with direct responsibility for anti-money laundering controls at the time when the suspected breaches occurred.

And while Dansk Bank’s management consistently maintained that the Estonian branch was only »a tiny part« of the bank’s total operations, Berlingske was now able to document that the portfolio of clients at the heart of the case was actually a money machine.

Major repercussions

In April 2018 Lars Mørch resigned from Danske Bank, having been the head of its Business Banking and International Banking - which included responsibility for the Baltic region – since 2012. The chairman of the board, Ole Andersen, directly linked Mørch’s resignation to the money laundering scandal.

In May 2018 the financial regulator, Finanstilsynet, levelled unprecedented criticism at Danske Bank’s handling of the money laundering issues. But despite the serious reprimands, Danske Bank was given no fines by the regulator.

On the same day that Finanstilsynet published its strongly worded criticism of Danske Bank over its money laundering affairs, the regulator’s chairman, Henrik Ramlau-Hansen, also publicly resigned from his post.

Danske Bank now expects to finish its own internal investigation into the scandal by September 2018. This review has been criticised for not being completely independent, but Danske Bank chairman Ole Andersen rebutted this criticism in an interview with the financial news site Finans.

North Korea

In June 2018 Berlingske and television news programme DR 21Søndag exposed yet another spectacular case with links to Danske Bank, revealing how the bank’s scandal-hit Estonian branch had previously been linked to a shady criminal case in 2009– this time involving the sale of illegal arms from North Korea.

These new revelations brought Rasmus Jarlov, the recently appointed minister for business and growth, to criticise Danske Bank’s handling of the case in very sharp terms.

The scandal grows and the police step in

Over the summer of 2018, the money laundering case took an explosive new turn.

First, Berlingske revealed that the suspicious money flows through Danske Bank’s scandal-hit Estonian branch appeared to be far more extensive than previously estimated. The total amount is now closer to 53 billion Danish kroner, or more than 8 billion US dollars – twice the previous estimate. This makes the Danske Bank case one of the largest known cases of money laundering in Europe.

An overview of Danske Bank’s dirty clients in Estonia is available here (in Danish).

Hot on the heels of that story, American-British financier Bill Browder reported Danske Bank to the police in both Denmark and Estonia. In July Estonian authorities opened an investigation into Danske Bank, while the Danish financial fraud unit, Bagmandspolitiet, launched its own investigation in August.

In September, Danske Bank is expected to publish the findings of its own internal investigation into the case. The bank’s chairman, Ole Andersen, spoke about the investigation to financial news site Finans in July 2018.

Translation: Bibi Christensen