Financial Crime World

EU States Force Clearing of Regulators Over Danske Bank Scandal

A major scandal surrounding Danish bank Danske Bank has led to the clearing of regulators in Estonia and Denmark. The controversy centers around allegations of massive money laundering through Danske Bank’s Estonian branch, with some estimates suggesting that over $20 billion was laundered.

Background

The scandal involves allegations that Danske Bank’s Estonian branch was used to launder funds from Russia, Ukraine, and other countries through the “Magnitsky scheme” and the “Azerbaijani Laundromat”. The schemes involved using shell companies and offshore accounts to funnel illicit funds into the global financial system.

Regulatory Failures

The Estonian Financial Supervision Authority (FSA) and the Danish Financial Supervisory Authority (DFSA) have faced criticism for their handling of the case. In October 2018, the Estonian FSA issued a statement saying that it was not aware of any suspicious transactions at Danske Bank’s Estonian branch until 2017, despite allegations that the bank had been alerted to potential money laundering as early as 2007.

Investigations and Charges

In May 2019, the Danish DFSA announced that it would be dropping its investigation into Danske Bank’s handling of the scandal. The move was met with widespread criticism, with many calling for greater transparency and accountability in the financial sector.

  • In December 2018, Estonia arrested ten people suspected of money laundering and other crimes in connection with Danske Bank’s Estonian branch.
  • In May 2019, former Danske Bank CEO Thomas Borgen was charged over his role in the scandal.
  • In February 2024, a major court case related to the scandal concluded, with several defendants being found guilty of fraud and money laundering.

Consequences

Danske Bank has denied any wrongdoing and has been cooperating with authorities in their investigations. However, the bank’s reputation has been severely damaged by the scandal, and it faces significant financial losses as a result of the controversy.

  • The scandal has sparked widespread outrage and calls for reform in the financial sector.
  • The European Banking Authority (EBA) has faced criticism for its handling of the case, with some accusing it of not taking the allegations seriously enough.

Conclusion

The Danske Bank money laundering scandal is one of the largest and most significant financial scandals in European history, highlighting the need for greater transparency and accountability in the global financial system.