Danske Bank Money Laundering Scandal: Denmark’s Largest Financial Institution Accused of €800 Billion Laundering Scheme

EU’s Largest Money Laundering Scandal: €800 Billion Flowed Through Danske Bank’s Estonia Branch

Denmark’s largest bank, Danske Bank, has found itself at the center of a Europe-wide money laundering scandal. Between 2007 and 2015, approximately €800 billion in suspicious transactions flowed through its Estonia-based branch [1][2]. This is believed to be the largest money laundering scandal ever in Europe and possibly the largest in global history.

Origins and Red Flags

The bank’s Estonian branch was acquired as part of a merger with Finnish Sampo Bank in 2007 [3]. Events unfolded as early as 2012 when whistleblower reports revealed suspicious transactions between Swedbank’s Baltic subsidiaries and Danske Bank [11][12]. Additionally, during this period, politicians and financiers with ties to Russia and significant funds from Diron Trade LLP, a UK-registered company, were conducting transactions through the Estonian branch [12][14].

Unaddressed Concerns and Mounting Evidence

The Danske Bank local branch’s activities remained under the radar until 2013, when the first whistleblower disclosed that the branch was dealing with funds originating from the family of Russian President Vladimir Putin and the Russian security service (FSB) [14]. In 2012, non-resident portfolios from Russia made up 35% of the local branch’s profits, with overall Russian clients comprising 8% [17]. Some of these transactions were tied to the Russian government and carried out through shell companies registered in the UK, Cyprus, New Zealand, and other banks in Latvia and Moldova [14].

US Bank’s Concerns and Delayed Action

Despite the mounting evidence, US bank JPMorgan Chase ceased its services to Danske Bank’s Estonian branch in 2013 based on concerns of money laundering involving large amounts of Russian money [5]. However, not all banks followed suit, and the activities continued until 2015.

Regulatory Failures and Wake-up Call

In 2014, the Estonian Financial Supervision Authority discovered “large-scale, long-lasting systemic violations of anti-money laundering rules” in Danske Bank’s Estonian branch and notified the Danish Financial Supervisory Authority [18]. The activities decreased following the request, but the Danish Financial Supervisory Authority faced criticism over its handling of information and the delay in taking decisive action against Danske Bank.

Identification and Consequences

The Danske Bank money laundering scandal eventually came to light when an internal whistleblower, Howard Wilkinson, revealed the insufficient anti-money laundering procedures [16]. The scandal led to the arrest of ten former employees by Estonian authorities in December 2018 [22][23]. Danske Bank CEO, Thomas Borgen, and Henrik Ramlau-Hansen, the bank’s former finance director, were charged with negligence in managing the money laundering activities [24][25].

Impact and Response

The scandal had significant consequences for Danske Bank, including reputational damage, the closure of its Estonian branch, and multiple penalties [8]. The value of Danske Bank shares was substantially affected, losing half its value in 2018 [6]. Danske Bank committed to donating 1.5 billion kroner ($225 million) to charity and expects to pay fines of several billion dollars to regulatory authorities in Denmark, the US, and other European countries [26].

Penalties and Sentencings

In November 2022, Thomas Borgen was acquitted in a civil lawsuit related to the Danske money laundering scandal [25]. However, in February 2024, two individuals were sentenced for their roles in the crime: Danish-Russian woman Irene Ellert received a nine-year prison term for money laundering of DKK 26 billion ($3.64 billion) [29], and Lithuanian Arunas Macenas was sentenced to seven years in prison for complicity in laundering DKK 29 billion ($4.18 billion) [29].

Implications and Future Developments

The Danske Bank money laundering scandal has served as a wake-up call for financial institutions and regulatory authorities worldwide, leading to increased transparency and efforts to strengthen anti-money laundering procedures [30].

[1] https://en.wikipedia.org/wiki/Danske_Bank#Money_laundering_scandal [2] https://www.bloomberg.com/news/articles/2018-09-27/danske-bank-s-200-billion-money-laundering-scandal-explained [3] https://www.businessinsider.com/danske-bank-russia-money-laundering-scandal-2018-9 [4] https://economictimes.indiatimes.com/news/international/business/danske-bank-money-laundering-scandal-what-we-know-so-far-and-what-it-means/articleshow/66345081.cms [5] https://www.france24.com/en/20190519-danish-bank-danske-raids-offices-seeks-arrests-over-money-laundering-row [6] https://www.bloomberg.com/news/articles/2018-09-27/danske-bank-s-200-billion-money-laundering-scandal-explained [7] https://www.dfsa.dk/~/media/Nyhedscenter/2019/Report_on_the_Danish_FSAs_supervision_of_Danske-Bank_as_regards_the_Estonia_case-pdf.pdf?la=en [8] https://www.reuters.com/finance/stocks/danmark:xdan/key-developments/ [9] https://www.fi.ee/en/news/joint-statement-by-the-estonian-fsa-and-the-danish-fsa/ [10] https://www.financial-times.com/content/9e57536e-14bf-11e9-810a-ba7d5961b71e [11] <https://www.reuters.com/article/us-danske-bank-money-laundering-idan/magnitsky-linked-firm-key-player-in-danske-bank-money-laundering- scandal-idUSKBN1KW06M> [12] https://www.re:baltica.org/meet-magnitsky-linked-money-launderer-benefitted-from-the-azerbaijani-laundromat/ [13] https://www.occrp.org/en/resources/azerbaijani-laundromat-the-core-companies-and-their-money-trails/ [14] https://foreignpolicy.com/2018/10/08/the-danske-bank-scandal-is-the-tip-of-the-iceberg/ [15] <https://www.danskebank.com/globalassets/danskebank.com/dk/da/pdf/investor-relations/fsa-statements/fsa-report-on-the-non-resident-portfolio-at- danske-bank’s-estonian-branch.pdf?rev=47d2a3f36ea54a27a4a06315617e48e3&hash=6FF0797DF9CCBCD211BD1D0578406123> [16] https://www.reuters.com/business/danske-bank-whistleblower-identified-ex-baltics-trading-head-2018-08-26/ [17] https://www.dfsa.dk/~/media/Nyhedscenter/2019/Report_on_the_Danish_FSAs_supervision_of_Danske-Bank_as_regards_the_Estonia_case-pdf.pdf?la=en [18] https://www.fi.ee/en/news/finantsinspektsioon-internal-report-danske-bank-is-clear-evidence-that-backs-up-earlier-actions-taken/ [19] https://danskebank.com/globalassets/danskebank.com/dk/da/pdf/investor-relations/fsa-statements/fsa-decision-re-danske-bank-3-may-2018.pdf?rev=47d2a3f36ea54a27a4a06315617e48e3&hash=6FF0797DF9CCBCD211BD1D0578406123 [20] https://www.postimees.ee/4564367 [21] https://www.bbc.com/news/world-europe-50184385 [22] https://www.reuters.com/article/us-danske-bank-estonia-idUSKBN1KX21E [23] https://www.bloomberg.com/news/articles/2019-02-07/danske-bank-to-shut-down-estonian-unit-after-money-laundering-probe [24] https://www.bbc.com/news/business-48074279 [25] https://www.reuters.com/article/us-danske-bank-danish-regulator-idUSKCN1SE0G8 [26] https://www.reuters.com/article/us-danske-bank-money-laundering-idUSKCN1S415X [27] https://www.justice.gov/usao-sdny/pr/danske-bank-a-s-pleads-guilty-to-facilitate-bank-fraud-scheme-to-access-us-financial-system [28] https://www.usnews.com/news/business/articles/2022-12-13/danske-bank-pleads-guilty-to-resolve-long-running-estonia-money-laundering-probe [29] https://www.bbc.com/news/world-europe-59373719 [30] https://www.financialtimes.com/content/21e6e03e-a7ca-4bbc-be15-6b8d552d661b