Financial Crime World

Danske Bank Scandal: Europe’s Largest Money Laundering Case involving Danske Bank’s Estonian Branch

Subtitle

Danish and Estonian authorities feud over jurisdiction as former employees face charges and bank CEO resigns

Danske Bank’s Estonian branch, which was acquired by Danske Bank in 2007 as part of a merger with Finnish Sampo Bank, has been under scrutiny since 2017 due to allegations of money laundering transactions worth around €800 billion between 2007 and 2015. This amount represents a significant portion of Danske Bank’s overall profits — 35% in 2012.

Jurisdictional Disputes and Criticisms

Both the Financial Supervisory Authority of Denmark (Danish FSA) and the Financial Supervisory Authority of Estonia (Estonian FSA) have grappled with the fallout from this scandal. With jurisdiction over the matter divided between the two authorities, there have been finger-pointing and mutual accusations of deficiencies. In January 2018, they acknowledged collaborating to share information regarding the case. However, the European Banking Authority (EBA) criticized both parties in a draft, leading to the early closure of the EBA’s investigation without publishing the findings.

Key Events in the Danske Bank Scandal

  • 2012: An Estonian Financial Supervision Authority report exposed suspect activities related to Danske Bank’s Tallinn branch. Allegations included $5.8 billion in money laundering transfers between Swedbank’s Baltic subsidiaries and Danske Bank in 2010 and 2011. Aivars Bergers, a Latvian Harmony party board member, received €270,000 from Diron Trade LLP, a subsidiary of Hermitage Capital Management implicated in the money laundering scheme.
  • 2012: A whistleblower reported Danske Bank’s Tallinn branch dealing with funds from the family of Russian President Vladimir Putin and the Russian security service (FSB). The claims went unheeded.
  • 2013: US bank JPMorgan Chase suspended its services to the Estonian branch of Danske Bank due to suspicions of money laundering large amounts of Russian funds. The Estonian Financial Supervision Authority found “large-scale, long-lasting systemic violations of anti-money laundering rules” in the Estonian branch of Danske Bank.
  • 2018: Danske Bank CEO Thomas Borgen resigned. Danish authorities charged Borgen and the bank’s former finance director, Henrik Ramlau-Hansen, with neglecting their responsibilities or failing to prevent the suspicious transactions, respectively. However, the charges against them were dropped in 2021.
  • 2019: Danske Bank was required by the Estonian government to close its Estonian branch.

Resolution and Convictions

  • 2022: Danske Bank pled guilty and agreed to $2 billion in fines from the US Department of Justice, marking the conclusion of the investigation.
  • 2024: Two key suspects, Danish-Russian woman Irene Ellert and Lithuanian Arunas Macenas, were convicted of money laundering, receiving sentences of nine and seven years, respectively.

References

[1] Finantsinspektsioon: The internal report of Danske is clear evidence that backs up the earlier actions of the independent Estonian financial supervisor to stop breaches by the bank. (fi.ee, 2018) [2] Investigations into Danske Bank’s Estonian branch. (Danske Bank, 2018) [3] ENGLISH: Links to dead Russian lawyer behind French money laundering probe against Danske Bank. (Berlingske, 2018) [4] The Tiny Bank At The Heart Of Europe’s Largest Money Laundering Scandal. (Forbes, 2018) […] [29] Dom er faldet i kæmpe hvidvasksag. Hovedperson idømt rekordlang fængselsstraf. (Berlingske, February 2, 2024)