Danske Bank Money Laundering Probe Causes EU, World Jitters

With Scandinavia’s reputation for being clean coming under scrutiny after some corruption reports, Denmark’s Danske Bank finds itself being looked at anew after reports alleged money laundering may have been far worse than reported.

The lender’s Estonian operations could have laundered as much as $8.3 billion from 2007-15, twice what was thought, media reports said, but which have resulted in only a wrist slap from regulators who told the bank to hold more capital, said the financial news agency Bloomberg.

Danske Bank CEO Thomas Borgen said in May he was “very sorry” and that the bank is “in a very different place today” when it comes to fighting financial crime as inquiries into what may have happened there are ongoing.

There were immediate repercussions with bank shares falling 3.6 percent on July 4 although Bloomberg Intelligence said it was likely an emotional rather than financial response once the news broke.

Still, there were worrying signs the bank ignored what was happening in Estonia where the non-residents unit was showing returns of more than 400 percent and that there wasn’t an anti-money laundering chief for most of 2013.

A report from Denmark’s financial regulator revealed money flowing from Russia into the European Union via Baltic banks using UK-registered shell companies and a Danish whistleblower reported false data being submitted to Britain’s corporate register, Companies House, one of the main centers of worldwide finance.

With the US taking tough action against money flows from Latvia where the central bank chief is facing corruption charges – and is a member of a key board of the European Central Bank – Baltic state regulators are being stirred.

In March, the ECB took away Estonian lender Versobank’s licence after allegations of criminal activity and the ECB’s top banking inspector, Daniele Nouy, recommended a stepped-up fight against money-laundering and uniform EU rules amid fears what happens in Denmark could reverberate around the world financial centers and governments.