AS EUPHEMISMS FOR suspected money-laundering go, “insufficiently legitimised” takes some beating. That is how Denmark’s Financial Supervisory Authority (FSA) described some of Danske Bank’s customers in a report in 2012. The country’s largest bank now faces criminal charges at home and investigations elsewhere.
The dirty-money scandal swirling around Danske is the largest ever uncovered. Over €200bn ($227bn) of suspicious transfers originating in ex-Soviet countries may have been rinsed through the bank’s Estonian branch. As the scale of the suspected laundering, dating back a decade, has emerged this year, the bank has lost its boss and seen its share price halved.
In preliminary criminal charges filed on November 28th, Danish prosecutors accuse Danske of failing to report suspicious transactions, not training staff in anti-money-laundering procedures, and having no senior manager responsible for compliance. They are considering whether to charge any individuals. Danske’s acting boss, Jesper Nielsen, said this week that the bank is “not in a position to contest a lot”.
Probes by America’s Department of Justice (DoJ) and Estonian authorities, meanwhile, are gathering pace. The DoJ could come down particularly hard if Danske is found to have handled transactions for firms or individuals subject to American sanctions. (There is no evidence of that.) Bill Browder, an anti-Kremlin campaigner who helped uncover the iffy transfers, has called for America to stop banks clearing dollars for Danske. The bank has built a reserve of as much as $2.7bn—equivalent to 85% of its net profit last year—to cover potential fines, and continues to add to it.
A whistleblower is making life even more uncomfortable for Danske. Howard Wilkinson, a former head of its Baltic trading operations (pictured on previous page), told a recent Danish parliamentary hearing that Danske first ignored the “smoke detector” he set off by reporting suspicions internally in 2013, and then tried to “obstruct criminal investigations” by getting him to sign a non-disclosure agreement (which it recently waived).
At least eight other banks handled some suspicious money, among them three correspondent banks that linked the Estonian branch to America’s financial system: Deutsche Bank, Bank of America and JPMorgan Chase. American investigators have asked them for information, though there is no indication they are targets. Mr Wilkinson says he has relevant information about other lenders. His lawyer says Danske “looks like the tip of the iceberg”.
Regulators also face scrutiny. Emails produced by Mr Wilkinson suggest that some at the FSA tried to protect Danske, rather than police it. It was several years after the agency first became aware of problems that it finally took action, and even then its written rebuke was brief and mild.
Mr Wilkinson has called for an independent inquiry into the FSA’s role to establish whether officials were guilty of misconduct as well as poor decision-making and foot-dragging. Mr Browder, meanwhile, has filed a complaint over the regulator’s role with Denmark’s attorney-general. Among its litany of allegations is a claim that in 2012 the FSA made a false representation to the Federal Reserve, stating that there were no money-laundering issues at Danske when it knew otherwise. There are reasons to suspect that the regulator helped cover up illicit transactions, the complaint concludes. The FSA’s director-general, Jesper Berg, says the agency “completely rejects” these allegations, and that it reprimanded Danske on four occasions between 2010 and 2018 and reported the bank to the police after finding that it had not implemented its anti-money-laundering action plan as claimed.
Whatever investigators conclude, Denmark has already lost its reputation as a country with a clean, well-supervised financial system. In 2017 Transparency International ranked it the world’s second-least-corrupt country, behind New Zealand. A place anywhere near the podium in 2018 would be scandalous, too.