The two biggest banks in Denmark are now being drawn into a case involving cross-border crime and money laundering of billions of kroner. The case is being investigated by the authorities in countries like Moldova and Latvia.
The authorities in the two countries suspect that an international criminal network for years has succeeded in hiding billions from illegal activities in a number of mayor banks, among them Nordea Denmark and Danske Bank Estonia.
Overall, around 7 billion kroner have been transferred to the Danish banks in the years 2011 through 2014 by way of more than 1700 money transfers. This emerges from data made available to Berlingske in coorporation with the international journalist organization Organized Crime and Corruption Reporting Project (OCCRP) and Russian daily Novaya Gazeta.
Thus, the banks have been instrumental in hiding away large sums of money in tax havens.
»It is a case of transactions of such a dubious character that all alarm bells ought to have been sounding at the banks,« said Lars Krull, a banking expert and advisor at the University of Aalborg, who has seen the material.
»It is quite startling information, casting doubt as to whether the banks have lived up to their commitments to the Act on Money Laundering. I am particularly amazed by the amounts in question and the fact that the transfers have continued over a period of years,« said Anne Birgitte Gammeljord, solicitor and expert on the Act on Money Laundering.
The Act was originally adopted in order to prevent criminals from sending ill-gotten money through the banking system, requiring the banks to supervise exposed customers and suspicious transactions. If, for instance, a costumer in a tax haven suddenly receives a large amount from a poor country like Moldova where the risk of money laundering is perceived to be high, the case must be forwarded to the state prosecutor for economic crime.
The bank data show that the money was typically sent from British shell companies with accounts in Moldova or Latvia. According to the authorities in the two countries, the shell companies were registered by intermediaries with a view to launder money from criminal activity in countries including Russia.
The recipients were typically companies in tax havens such as the Seychelles and Panama with accounts in the Danish banks.
»The aim of this scheme was to get the money out of Russia, and there had to be found a more or less legal reason why this is done,« said Maija Treja, deputy director at the Latvian Finance Capital and Market Commission.
On the origin of the money, she is unequivocal:
»Obviously, it was money either stolen or with criminal origin. But what the regulator can do is just to say that the bank has not defined the true origin and the legal origin of these funds,« she told Finnish national television YLE, that is cooperating with Berlingske on the story.
Experts are baffled by the fact that the transactions have continued unhindered for several years.
»There is simply no reason why a company in Britain should be transferring large sums of money via a bank in Moldova to a Danish bank account owned by a company in a place like Panama. That just sounds very fishy,« said Lars Krull.
»It is difficult to understand why nobody – neither banks nor authorities – have put an end to this traffic one way or the other,« he continues.
The case follows the revelations of the role of banks in tax evasion.
In 2013, the so-called offshore leaks revealed tax evaders across the world. In 2014 followed The »Luxleaks”« revealing secret tax avoidance schemes in Luxembourg.
Finally, in the spring of 2016 followed the so-called Panama Papers revealing amongst other things how Nordea Bank aided its clients in establishing themselves in tax havens. This case last week led to a crippling critique of the banks.
The new data provide a unique insight into the way dubious transfers have been conducted over several years.
»It is striking that dirty secrets about Danish banks are always popping up, when you have these leaks,« said Lars Koch, international director and tax expert at the charitable organization Oxfam Ibis, pointing out that during previous leaks the banks firmly assured the public that they did indeed supervise their customers thoroughly.
»The banks claim to live up to their responsibility and to address the issue of money laundering and tax evasion. But here are data showing that Nordea and Danske Bank have not lived up to their obligations for the years 2012, 2013 and 2014. It would seem there is no correlation between their fine words and their actual deeds.«
Danske Bank preferred
The intermediaries have used a number of international banks but especially the Estonian branch of Danske Bank has been frequently used. The bank is number three on the list of banks having received the most money in the case at hand. Almost 7 billion kroner, spread over 1500 transfers, have ended up in the bank, the data show. In the case of Nordea Denmark, the amount is about DKK 250M.
At Danske Bank they recognize that the control system has failed:
»We haven’t had sufficient control over this type of customer and we have failed to monitor suspicious transactions in the Estonian branch. We have since corrected this, but it took to long to close down these activities. Status now is that all but one of these customer relationships have been settled,« said Flemming Pristed, General Counsel at Danske Bank.
In 2015, he relates, the bank became aware of the suspicious customer relationships. When the bank could not confirm the legitimacy of the transactions they chose to suspend the relationships and report the cases to the authorities. Since then procedures have been tightened and the management changed at the Estonian branch.
»It is certainly a serious incident for us and we would obviously like to avoid this kind of cases. We do not want to be used for money laundering,« assures Flemming Pristed while maintaining that the problem was isolated at the Estonian branch.
Nordea have tightened the rules
At Nordea, the largest bank of the Nordic countries, the money floated into accounts at the Danish branch of the bank. It is as yet unclear if the bank has reported the problem to the authorities as required.
»For the sake of our customers' privacy it is our policy not to comment on specific customer relationships,« said press officer Stine Wind.
However, she points to the fact that the transactions in question were conducted before the bank implemented a range of extensive changes »relating to past deficiencies towards money laundering.«
Less than five of the customers in question are still with the bank, she wrote – albeit without clarifying how the termination came about.
»We are very serious about the safety of our customers, the bank and society at large and we invest heavily in the area. We are firmly against being used as a platform for laundering or other forms of criminal activity,« said Stine Wind.
Authority springs to action
Berlingske have presented the Danish Fraud Squad and The Financial Supervisory Authority with the material. Acting Assistant Chief of Police Thomas Anderskov Riis declined to comment on specific details but he assured that the state prosecutor for economic crime would work closely with the Financial Supervisory Authority on the investigation.
CEO of The Financial Supervisory Authority Jesper Berg promised to take action based on the materiel presented by Berlingske:
»This may well be a major new case of money laundering extending beyond the borders of Denmark and therefore we are in contact with the relevant authorities.«
The case traces back to 2014 when it emerged that up to $ 20B had been laundered through the banks Trasta Komercbanka and Moldindcon in Latvia and Moldova respectively. The origin of that money has yet to be established but the investigation so far hints at criminality in Russia among possibly other places.
The intermediaries succeeded in disguising the money as repayment of non-performing loans. This maneuver required the use of countless of shell companies around the world, fictitious loans plus the aid of fourteen Moldavian judges, now arrested and charged.
From Moldova the money was transferred to a host of well-known banks throughout Europe – Nordea and Danske Bank being just two of them.
Big, international banks like Deutsche Bank and British HSBC have also been targeted.
Other stories from Berlingske's Investigative Team.