Estonian lender LHV Pank will buy the corporate and public client loan portfolio from the local unit of Danske Bank that was in the centre of a huge money-laundering scandal that rocked Europe’s finance industry in 2018 and 2019, the bank's mother company, LHV Group, said on June 8.

The deal marks the end of Danske Bank’s operations in Estonia, in line with last year’s order from the Estonian financial market watchdog Finantsinspektsioon. The watchdog told Danske Bank to wrap up its Estonian business after it was exposed to have funneled billions of euros in a massive breach of national and EU anti-money-laundering regulations.

The scandal prompted calls to boost EU’s control power over money flows in and out of the bloc but some member states – including Estonia – reportedly blocked progress during a closed-door meeting of EU finance ministers in May.

“The transaction will be finalised in October [when] the final scope and price of the transaction will also be determined. The volume of the portfolio is anticipated to amount to €280 million euros [then],” LHV Pank said in a statetement.

The Estonian bank will buy the portfolio at a discount of €19mn, it also said.

About 42% of the portfolio consists of corporate loans and 54% consists of loans to local governments. “This is a strong credit portfolio with relatively low capital requirements for the loans involved with local governments. The business unit will be acquired with employees,” LHV Pank said in a statement.

With the transaction, LHV Pank will take over from Danske Bank the servicing of about 670 business clients and 85 public sector customers.

The transaction will have a significant impact on the financial situation of LHV, the company said. The loan portfolio of LHV Pank amounted to €1,75bn at the end of April. By acquiring Danke Bank's] business unit, the portfolio will grow by about €280mn.

Danske Bank was exposed in 2018 to have put an estimated €200bn worth of payments – many of them suspicious - through its Estonian branch between 2007 and 2015.

“We had a large number of non-resident customers in Estonia that we should have never had, and that they carried out large volumes of transactions that should have never happened,” the bank said at the time.

The former head of Danske's Estonian branch, Aivar Rehe, was found dead on September 25, two days after being reported missing from his home in the Tallinn suburb of Pirita. The Estonian police determined he had committed suicide. 

Since the money-laundering scandal erupted, Danske Bank has withdrawn from Russia and Latvia. It maintains a branch in Lithuania, which will serve any loans that will have left following the sale to LHV Pank.

LHV Pank also acquired Danke Bank’s individual client portfolio in 2019.