Danske Bank’s money laundering scandal spread to Britain yesterday as the National Crime Agency (NCA) said it is investigating the use of UK-registered companies.
Concern about the extent of possible money laundering involving Danske Bank’s Estonian branch is mounting and European Union Competition Commissioner Margrethe Vestager joined a growing chorus of calls for a clampdown on the billions of euros alleged to have been “washed” through European banks.
“This is a giga scandal,” Vestager said, as Danske Bank’s already battered shares fell by more than 2% on the latest developments in the case.
Britain’s NCA said the threat posed by the use of UK-registered companies for money laundering was “widely recognised” and it was working to restrict the practice.
“The NCA is aware of the use of UK registered companies in this case and has related on-going operational activity,” an NCA spokeswoman said.
She said the British agency was working with partners across government on the matter.
British and Russian entities dominate a list of accounts used to make €200bn ($236bn) in payments through Danske Bank’s branch in Estonia between 2007 and 2015, many of which the bank said this week are suspicious.
By 2013, the number of UK-registered customers in the branch’s non-resident portfolio had topped 1,000, Danske Bank’s investigation revealed, ahead of clients from Russia, the British Virgin Islands and Finland.
As the scope of the alleged money laundering through Danske has widened, investor concerns over the potential penalties it could face have increased, with particular focus on what action US authorities might take.
So far the United States has not said whether it is investigating and while Danske Bank Chairman Ole Andersen said that the lender had made an assessment of whether it violated any US laws, he declined to share its conclusion of this.
“We need to do more to prevent money laundering from happening,” Vestager told reporters in Copenhagen following the resignation on Wednesday of Danske Bank CEO Thomas Borgen after an investigation commissioned by the bank exposed past control and compliance failings.
Borgen, 54, was in charge of Danske Bank’s international operations including Estonia between 2009 and 2012.
He said on Wednesday that he had been “personally cleared from a legal point of view” while Danske said its board had not breached their legal obligations.
The European Commission last week recommended banking supervision changes, including bolstering national authorities, but stopped short of setting up a new financial crime agency called for by the European Central Bank.
Danske’s tiny Estonian branch accounted for as much as 10% of group profit during the period when suspected money laundering was conducted via its operations there.
Denmark’s central bank said yesterday that it supported a proposal for tougher laws on money laundering agreed by politicians on Wednesday.
“It is the managements of Danish financial institutions that are responsible for ensuring that there is no money laundering or other illegal acts,” the central bank said.
“As the largest bank in the country, Danske Bank is of major importance to the reputation of the financial sector and hence the financial stability of Denmark.”
Credit ratings agency Moody’s said yesterday regarding Denmark’s AAA rating: “It is very unusual for problems at a single bank to have material credit implications for highly-rated sovereigns.
We see no reason to date why the concerns regarding Danske Bank should create an exception to that rule.”
Danske Bank already faces criminal inquiries in Denmark and Estonia following complaints filed by US fund manager Bill Browder, who has campaigned against corruption in Russia.
And in a sign of the growing backlash, the charity CARE Danmark said it was severing ties with Danske as its main bank.
“We’ve decided to drop Danske Bank due to the money laundering scandal which is incompatible with the values our organisation stands for, and what our members expect of us,” CARE Danmark CEO Rasmus Stuhr Jacobsen told Reuters.
Denmark’s largest NGO, the Danish Refugee Council, said it is also considering dropping Danske Bank, Secretary General Christian Friis Bach told online media outlet Altinget.
International aid charity Oxfam also called on Danish municipalities to cut ties with the bank.
The mayor of Aalborg, Denmark’s third largest municipality, said he would discuss its partnership with Danske Bank at the next municipality committee meeting, but noted that there were only two banks in Denmark able to handle a municipality its size.
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