The extent of suspicious money flowing through the scandal-hit Estonian branch of Danske Bank now appears far greater than what was previously thought.
Over the past year, Berlingske has uncovered money laundering of at least 25 billion Danish kroner through accounts held at the bank.
But Berlingske is now in possession of bank statements covering a further 20 companies which held accounts with the Estonian branch over various periods from 2007 to 2015.
In total, the documents show some 28 billion DKK being moved through these 20 accounts. This means that, overall, at least 53 billion DKK in suspicious transactions – more than twice the previous estimate – was sent through the branch.
Experts say these 20 accounts show clear signs of extensive money laundering:
»Any competent investigator would have come to the conclusion that this was highly indicative of money laundering and should have prepared a formal report for filing with their local regulator,« says Graham Barrow, an experienced British money laundering expert who has worked on anti-money laundering compliance with major banks such as HSBC and Deutsche Bank. He has examined some of Berlingske’s data.
Both the companies and the transactions appear very similar to previous instances of money laundering described by Berlingske.
The 20 companies behind the accounts are typically registered in known offshore havens such as Panama, Belize and British Virgin Islands, but with a postal address in Moscow. They have no discernible activities, website or staff. The true beneficiaries are hidden behind intermediaries, and company registers show that several of them have lodged false financial accounts with the authorities.
The activities on these accounts are also suspicious: Large amounts are transferred several times a day from other suspicious companies. The money criss-crosses betweeen companies before finally being moved to other offshore companies or purveyors of precious stones, luxury cars and exclusive homes across the globe.
»Even at an early stage alarm bells should have rung,« says Graham Barrow.
He points to several clearly suspicious circumstances – such as some of the companies having registered addresses at so-called office hotels with hundreds of other suspicious companies. There are also numerous examples of substantial amounts being paid daily into these accounts by one offshore company, before quickly being moved on to another offshore company, a clear indicator of true beneficiaries seeking to hide money flows.
The American anti-money laundering expert L. Burke Files, who has examined some of the account statements, also sees several red flags:
»Much of what I see fits trade based money laundering. The purchase of goods and services over seas used as a ruse to get money out of a country, or pay someone off or evade taxes,« he says.
The companies behind these 20 new accounts, for which Berlingske now has bank statements, include names such as Diamonds Forever International, Argenta Systems, Megacom Transit, Castlefront, and Jawdom Services Corp.
They are all connected to the so-called Magnitsky case, named after Russian lawyer Sergey Magnitsky who exposed the theft of large sums in tax payments from the Hermitage Capital investment fund and others by high-ranking Russian officials and organised criminals.
Magnitsky ended up dying in a Russian prison under suspicious circumstances, and the people behind Hermitage Capital have since worked to track the fraud money. The bank statements show the Magnitsky money being funnelled through accounts with Danske Bank to pay for luxury properties around the world or to benefit companies allegedly controlled by powerful Russian oligarchs and politicians.
But the accounts were also used for numerous other suspicious money transactions, it appears from the bank statements. The founder and director of Hermitage Capital, William Browder, and his investigators see clear signs that all of the accounts may have been used for money laundering. These signs include a complete absence of normal business activities – such as expenses paid for rent, staff salaries and taxes. And the transactions are often accompanied by false declarations of their purpose, which is a clear sign of money laundering.
»The officials at the bank could not have been unaware of the clear money laundering flags. For example, some of the payments made from Estonian accounts to a Real Estate firm in Dubai were labelled as for auto spare parts or equipment,« William Browder says.
»The bank should not have opened accounts without proper due diligence. Secondly, it should have supervised that transactions on accounts were in accordance with anti-money laundering regulations. Thirdly, it should have immediately reported suspicious activity to the authorities. None of these has been done,« he adds.
He expects authorities in both Estonia and Denmark to launch immediate investigations into the case:
»The Danish authorities should investigate the possible liability of leadership at the Danske Bank in allowing for the wide spread money laundering to occur,« William Browder says.
With a scale of at least 53 billion DKK, or around 8.3 billion U.S. dollars, the Danske Bank case now potentially ranks alongside some of the largest known cases of money laundering in Europe. In 2014 the French bank BNP Paribas was handed a large billion-dollar fine for facilitating money laundering to the tune of 8.8 billion dollars. And last year Germany’s Deutsche Bank was given record fines by U.S. and British regulators for allowing money laundering of nearly 10 billion dollars.
Danske Bank has so far not faced any fines or police charges for its role in money laundering through Estonia.
The fresh data leak covers a total of 43,112 transactions, of which several appear to be text-book examples of money laundering: 132 transactions went to real-estate agents for luxury properties across the globe. Some 24 transactions went to purveyors of diamonds and precious stones, while another 25 transactions were for purchases of luxury cars such as Mercedes, Porsche and BMW.
Several of the companies appearing in the data leak are already well known in connection with money laundering cases. These include the company Argenta Systems Ltd., registered in the offshore haven of Belize, but with a postal address in Moscow and accounts with Danske Bank Estonia. Such a company structure is suspicious in itself, experts say.
In the autumn of 2017, French police raised preliminary charges against Danske Bank for facilitating money laundering in connection with transactions from Argenta Systems Ltd. to a French company, S.a.r.l. Decobat, which on paper traded in paints and similar products. Dansk Bank no longer faces charges in this matter but remains part of the investigation for witness testimonies.
A large number of the suspicious transactions into the Argenta account come from other companies in well-known offshore havens such as Cyprus and the Seychelles. One such example, on 3 May 2011, shows 209.712 euro being transferred via a Latvian bank from a company in the Seychelles sharing the same address as the law firm of Appleby which in November 2017 was at the heart of the so-called »Paradise Papers« leak. The money from the Appleby company is listed as being for »building equipment«.
The same description – »building equipment« - is given for another eight transactions from Argenta to the Dutch company Scala Agenturen bv. This appears to be a false description, as Scala Agenturen deals in sex toys, not building equipment.
Other transactions from the 20 accounts appear to go directly to criminal operators in Estonia and corrupt officials in Russia which Berlingske’s research has shown to be known from other legal cases involving money laundering and corruption. Berlingske has not yet been able to obtain complete confirmation of these circumstances.
Berlingske has spent more than a year uncovering the substantial flow of suspicious money through accounts in Danske Bank Estonia. Some of these companies were used to hide beneficiaries such as the Azerbaijani regime and allegedly also the Putin family and Russian intelligence. The bank has since launched major probes which are expected to conclude in September, and the case has led to the resignations of both an executive with the bank and the head of the Danish financial regulator, Finanstilsynet.
»This new data leak shows that we have yet to see the full extent of the Danske Bank case. Money laundering of more than 50 billion kroner is an astronomical amount, and it just makes it even more spectacular that Danske Bank has so far escaped any fines,« says Jakob Dedenroth Bernhoft, an expert on anti-money laundering laws and director of the Revisorjura.dk advisory firm.
Danske Bank CEO Thomas Borgen, who headed the bank’s international activities, including the Estonian branch, from 2009 to 2012, has apologised while also stating that he was not sufficiently briefed on the state of affairs in Estonia.
»The full extent of this case makes it even harder to understand why there is still talk of how much the bank’s top management knew. In legal terms it’s more appropriate to talk about what they should have known. With the extent of this case, the top management should have known about suspicious transactions of this size,« Jakob Dedenroth Bernhoft says.
The Danske Bank head of Group Compliance, Anders Meinert Jørgensen, declines to comment on the much bigger amount that has now appeared. In an emailed response, he states:
»As we have previously said, it is too soon to make any conclusions about the extent of potential money laundering in Estonia. Therefore, we have not published our own figures or heeded speculation on the extent of this case. But we have indicated on several occasions that the extent appears to be somewhat bigger than what has previously been reported,« he states. CEO Thomas Borgen has previously said to Danish broadcaster DR that the money laundering appeared to be more extensive than initially thought.
Anders Meinert Jørgensen stresses, though, that “just one money laundered krone is one too many” and that the bank is taking the matter “very seriously”, referring to investigations launched by the bank following Berlingske’s revelations.
»All clients in the former Estonian portfolio, which was closed down several years ago, will be examined. And we will also report to the authorities any issues where this may not already have happened,« Anders Meinert Jørgensen says.
Translation: Bibi Christensen