As much as €7.1bn may have been laundered via the Estonian operations of Danske Bank, Denmark’s biggest lender, Danish and international media reported.
If confirmed, the scale of money laundering at the bank would be more than twice the previous estimates. Danske Bank has so far escaped serious repercussions for failing to monitor money flows at its Estonian branch, but the new revelations could put it back in trouble.
The bank is currently carrying out an internal probe into the laundering case and has implemented a number of changes in response, including hiring a new management team in Estonia. It also had to boost its regulatory capital on the orders of the Danish Financial Supervisory Authority.
The probe began after the Danish newspaper Berlingske and UK media made the first allegations about money laundering at the bank’s Estonian branch in late February.
The new spotlight shone on the case on July 3 and July 4, when Berlingske and later Bloomberg reported that the scale of illicit operations was far bigger.
Some of the questionable money flows were linked to a corruption scheme exposed by Sergei Magnitsky, a lawyer for Hermitage Capital Management fund, the fund’s manager Bill Browder claims, according to Bloomberg.
Magnitsky died in custody in 2009, while Browder, who was forced to leave Russia, has been leading a campaign to expose the Kremlin for its human rights abuses.
The newly revealed large scale of money laundering at Danske Bank broadens the scope of interest in unmonitored money flows from Russia and other countries of the former Soviet Union – such as Moldova or Azerbaijan, as is reportedly the case of the Danske Bank laundromat – into the European Union via the Baltic states.
Latvia, in particular, has developed a reputation of being a safe haven for illegal money because of its boutique banks industry that specialised in non-resident deposits.
The Latvian authorities are stepping up their efforts to crack down on money laundering after the country’s third largest lender ABLV folded earlier this year following allegations of the US government that it was a major money launderer and facilitator of transactions linked to North Korea.
The money laundering scandals in Eurozone members Estonia and Latvia are also an embarrassment for the European Central Bank, which is coming under fire for overlooking problems in the Baltic states. The ECB says it does not have adequate control powers and has called upon member states to better cooperate on tracking down suspicious transactions.