AML Failings in Estonia: Danske Bank Fined Hundreds of Millions

Angelika Hellweger of financial crime specialists Rahman Ravelli details the Danish bank’s shortcomings.

Danske Bank has been made to pay 4.7 billion kroner ($671 million) after admitting failing to report suspicious activity at its Estonia branch promptly to Denmark’s financial intelligence unit.

The court in Copenhagen ordered the bank to pay a 3.5 billion kroner fine and forfeit the 1.2 billion kroner that was its profit from processing the potentially illicit transactions.

The Danish Public Prosecutor’s office stated that Danske Bank waited more than two years to shut down its Estonian branch’s non-resident portfolio after a whistleblower first raised concerns in 2013 about money laundering on a huge scale by customers.

The whistleblower, a former manager at Danske Bank in Copenhagen, was said to have reported that an alleged $240 billion money laundering scheme was being conducted at Danske’s Estonian operations. Money was being laundered from Russia and former Soviet republics to western banks.

In the Copenhagen hearing, Danske admitted a failure to identify ultimate beneficial owners, shortcomings in its transaction monitoring system and very limited suspicious activity reporting to the relevant authorities. The bank also accepted there was not enough communication between its executive board in Copenhagen and its management in Estonia and that there had been a lack of response to both whistleblower reports and media reports about customers.

The Copenhagen court’s order is part of a wider coordinated action involving US and Danish authorities, who are looking to conclude investigations into Danske’s Estonian activity.  

This month, Danske pleaded guilty in the US to bank fraud charges and agreed to pay $2 billion to settle investigations by the US Department of Justice and Securities and Exchange Commission. Federal prosecutors have accused Danske of misleading US banks and investors about the quality of its anti-money laundering procedures.

Danske ended all its operations in Baltic countries three years ago. The actions brought against it over its Estonian money laundering failings are just part of an increasing scrutiny of financial institutions’ anti-money laundering systems by governments in various countries.