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Published online by Cambridge University Press: 19 December 2024
Danske Bank: case study
The largest known case of money laundering, in which up to €200 billion from Russia and other laundromat schemes was channelled through the Estonian branch of a large Danish bank between 2007 and 2015.
The issues at Danske Bank date back to November 2006 and its acquisition of the Finnish bank, Sampo Bank, along with its subsidiaries in Estonia, Latvia, Lithuania and a recently acquired bank in Russia. Since the 1990s, Sampo Bank in Estonia had developed a portfolio of non-resident customers, in particular serving Russian clients. Following the acquisition, the branch operated with a high degree of independence. Danske Bank Estonia had its own IT systems which meant customers were not covered by the group's risk monitoring systems.
The non-resident portfolio in Danske Bank Estonia is the main focus of investigations into money laundering. There were around 10,000 customers in total in the portfolio between 2007 and 2015. By 2013 the branch held 44 per cent of all deposits for non-resident customers in Estonian banks. In the relevant period, profits from the portfolio represented 40– 79 per cent of the branch's annual profits, and were an important source of income for the Danske Bank group as whole. Deposits originated from customers in various countries including Russia (23 per cent), Latvia (12 per cent), Cyprus (9 per cent) and the UK (4 per cent).
From 2007, Estonia's financial regulator, the Estonian Financial Supervisory Authority (EFSA), raised repeated concerns about money laundering risk with Danske Bank. The bank nonetheless continued to grow the non-resident portfolio over the next six years. The bank also declined to scale back the business in 2013 after the US bank J.P. Morgan ended its correspondent banking relationship with Danske Bank Estonia due to concerns around its money laundering controls.
Investigations escalated in December 2013 after a whistleblower, Howard Wilkinson, head of the bank's trading business in the Baltics from 2007 to 2014, came forward. He told the bank's Executive Board that the Estonia branch had “knowingly continued to deal with a company that had committed a crime”.
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