Financial Crime World

Danske Bank’s Estonian Branch at the Heart of Europe’s Largest Money Laundering Scandal: A Billion-Dollar Scheme Unraveled

Europe’s Largest Money Laundering Scandal

Denmark’s largest bank, Danske Bank, has been embroiled in Europe’s largest money laundering scandal, with around €800 billion in suspicious transactions flowing through its Estonia-based branch between 2007 and 2015.

  • Approximately €800 billion in suspicious transactions
  • Described as Europe’s largest, and possibly the world’s largest, money laundering scandal

Origin and Distribution of Transactions

Source: [15]

Over 60% of the transactions originated from:

  • Estonia
  • Russia
  • Latvia
  • and other countries

Over two-thirds of the transactions were distributed to:

  • Estonia
  • Latvia
  • China
  • Switzerland
  • Turkey
  • United Kingdom

Lax Oversight

Acquisition of the Local Branch in Estonia

  • Danske Bank headquartered in Copenhagen
  • Branch acquired in 2007 as part of a merger with Finnish Sampo Bank
  • Under the jurisdiction of both the Financial Supervisory Authority of Denmark and the Financial Supervisory Authority of Estonia

Critical Reports and Ignored Warnings

  • Series of reports emerged starting in 2012
  • Discovered transfer activity relating to Russian whistleblower Sergei Magnitsky’s stolen Hermitage Capital Management subsidiary
  • Allegations of transactions linked to the Russian government and the Russian security service (FSB)
  • Whistleblowers alerted authorities

AML Procedures and Ineffective Controls

  • Danske Bank believed for a “long time” that proper AML procedures were mitigating high risks
  • Bruun&Hjejle’s report revealed AML procedures were insufficient by 2018

Danske’s Troubled History

Profitable Non-Resident Portfolios from Russia

  • Russians made up only 8% of clients
  • Reported linked to Russian government, done via shell companies, and other banks in Latvia and Moldova

JPMorgan Chase Halts Services

  • Suspected Danske Bank of laundering large amounts of Russian money
  • Other banks continued providing services until 2015

Estonian Financial Supervision Authority Finds Systemic Violations

  • Reported findings to the Danish authorities
  • Activities decreased

A Former Executive Found Dead

  • Former head of Danske Bank’s Estonian branch, Aivar Rehe
  • Disappeared in September 2019
  • His death was ruled a suicide by the Estonian police

Costs and Consequences

Arrests and Closures

  • Ten former employees arrested in December 2018
  • Danske Bank required to close its Estonian branch in 2019

Executive Resignations and Charges

  • Danske Bank CEO, Thomas Borgen, and former finance director Henrik Ramlau-Hansen charged

Increased Penalties for Money Laundering

  • The Danish Parliament increased penalties eightfold

Fines and Forfeitures

  • Danske Bank expects to pay fines of several billion dollars
  • In December 2022, Danske Bank pled guilty and agreed to pay a $2 billion fine

Criminal Sentences

  • In February 2024, Denmark’s court sentenced two facilitators to nine and seven years in prison

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. Retrieved 2018-10-15.
  • [2] “Investigations into Danske Bank’s Estonian branch”. Danske Bank. Retrieved 2018-10-14. […] [30]