Financial Crime World

EU States Force Clearing of Estonian and Danish Regulators Over Danske Bank Scandal

A major money laundering scandal has led to a rare clearing of regulators by EU states, forcing the Estonian and Danish financial supervisors to take responsibility for their role in the Danske Bank case.

The Scandal Unfolds

In 2018, it was revealed that Danske Bank’s Estonian branch had been used as a hub for massive money laundering operations, with billions of dollars flowing through the bank from Russia, Azerbaijan, and other countries. The scandal led to the resignation of the bank’s CEO and a major overhaul of its anti-money laundering practices.

However, an investigation by Reuters revealed that both the Estonian and Danish regulators had failed to properly supervise the bank’s activities, allowing the money laundering to continue for years. The European Banking Authority (EBA) also dropped a probe into the matter in 2019, leading to calls for reform.

Consequences of the Scandal

The scandal has led to a number of high-profile arrests and charges, including former Danske Bank CEO Thomas Borgen, who was charged with money laundering in 2019. In 2022, the bank pleaded guilty to fraud on US banks as part of a multi-billion dollar scheme to access the US financial system.

Despite the scandal, Danske Bank’s executives have been cleared of wrongdoing in several lawsuits, including a $322 million investor lawsuit over the Estonia case.

Reform Efforts

The clearing of regulators has sent shockwaves through the financial industry, with many calling for greater accountability and oversight. The European Commission has announced plans to reform EU banking regulations to prevent similar scandals from occurring in the future.

Key Players

  • Danske Bank: A Danish bank that was at the center of the money laundering scandal.
  • Estonian Financial Supervision Authority (FSA): The regulator responsible for supervising Danske Bank’s activities in Estonia.
  • Danish Financial Supervisory Authority (FSA): The regulator responsible for supervising Danske Bank’s activities in Denmark.
  • European Banking Authority (EBA): A EU-wide regulatory body that oversees banking supervision.

Timeline

  • 2017: The Azerbaijani Laundromat scandal is revealed, revealing massive money laundering operations involving Danske Bank and other banks.
  • 2018: The Estonian FSA and Danish FSA are cleared of wrongdoing in the scandal.
  • 2019: Former Danske Bank CEO Thomas Borgen is charged with money laundering.
  • 2022: Danske Bank pleads guilty to fraud on US banks as part of a multi-billion dollar scheme.

Reactions

  • The European Commission has announced plans to reform EU banking regulations to prevent similar scandals from occurring in the future.
  • Many are calling for greater accountability and oversight in the financial industry.
  • The scandal has led to a number of high-profile arrests and charges, including former Danske Bank CEO Thomas Borgen.