Danske Bank to waive profit from suspicious transactions in Estonia

Danske Bank to waive profit from suspicious transactions in Estonia
By bne IntelliNews July 19, 2018

Danske Bank will forgo profits it had made via “suspicious transactions” in its Estonian branch which are now subject to an investigation for possible money laundering, the bank said on July 18.

As much as €7.1bn may have been laundered via the bank’s Estonian operations, Danish and international media reported earlier this month. The alleged money laundering is the focus of probes by financial regulatory authorities in Denmark and Estonia, as well as an internal investigation.

“The bank should not benefit financially from suspicious transactions that have taken place in the non-resident portfolio in its Estonian branch,” Danske Bank said in a statement.

“Consequently, the bank intends to make the gross income from such transactions available to the benefit of society, for instance through supporting efforts to combat financial crime,” it added.

Danske Bank said it was unclear how much income was derived from the transactions in question. The total gross income from the Estonian non-resident portfolio in 2007-2015 was DKK 1.5bn (€200mn), the lender estimates.

The Danish newspaper Berlingske and UK media made the first allegations about money laundering at the bank’s Estonian branch in late February.

Some of the questionable money flows were linked to a corruption scheme exposed by Sergei Magnitsky, a lawyer for Hermitage Capital Management fund, according to fund manager Bill Browder, Bloomberg reported.

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 possibly 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 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.