Watchdog closes Danske Bank’s Estonian branch over scandal

Estonia's banking watchdog FSA said Tuesday it has ordered Denmark's largest lender Danske Bank to close its local branch within eight months, following a money laundering scandal.

Watchdog closes Danske Bank's Estonian branch over scandal
Danske Bank's Tallinn branch in 2017. Photo: RAIGO PAJULA/Ritzau Scanpix)

Investigators in Copenhagen, Brussels, London and the United States are probing some 200 billion euros in transfers that passed through the Estonian branch between 2007 and 2015, involving some 15,000 foreign clients.

Last December, Estonian authorities detained 10 former Danske employees on suspicion they had facilitated money laundering via non-resident clients, including many Russians.

“We have every right to put an end once and for all to this very exceptional and unfortunate case,” FSA (Financial Supervision Authority) head Kilvar Kessler said in a statement Tuesday.

The FSA gave Danske 20 days to submit an action plan for closing the branch.

On Monday, the European Banking Authority announced it was opening a formal investigation into a possible breach of EU laws by the FSA and its Danish counterpart Finanstilsynet over the case.

Kessler said the scandal had “dealt a serious blow to the transparency, credibility and reputation of the Estonian financial market, while the supervisory authority of the home country has handled the bank softly.”

Last November, Danish prosecutors brought preliminary charges against Danske for violating money-laundering laws between February 2007 and January 2016.

Danske has acknowledged that much of the money that went through the branch during that period may need to be treated as suspicious in origin.

At the end of 2018, the Estonian branch had around 14,700 depositors in Estonia and 12,300 borrowers.

Estonia's central bank said Tuesday the shutdown would have little effect on the Estonian economy as Danske had stopped providing services to private individuals in 2015.

In April 2018, Danske announced it had stopped opening new accounts for local businesses in the Baltic States.

READ ALSO: More on the Danske Bank money laundering scandal

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Danish police drop money laundering case against Danske Bank directors

Denmark’s economic crime unit SØIK has dropped potential charges for money laundering against three leading former directors of Danske Bank, Denmark’s largest bank, but investigation of the bank itself continues.

Danish police drop money laundering case against Danske Bank directors
File photo: Jacob Gronholt-Pedersen/Reuters/Ritzau Scanpix

The three directors, Thomas Borgen, Henrik Ramlau-Hansen and Lars Stensgaard Mørch were investigated in relation to a scandal involving large-scale money laundering at the Estonian division of the bank.

Each of the three confirmed to newspaper Børsen that charges have been dropped.

In a written statement to media, SØIK said it had not uncovered “evidence that any individual has shown negligence to such an extent that it can be characterised as gross” and that the law had therefore not been broken.

“For an individual to be convicted under money laundering laws, they must have committed gross negligence. In this case we have conducted a vert comprehensive and thorough investigation with a number of investigative steps,” acting head of SØIK Per Flig also said in the statement.

The bank itself is still under investigation for possible breach of money laundering laws, however, Flig noted.

READ ALSO: US files lawsuit against scandal-hit Danske Bank

No individuals now remain under suspicion in the investigation, meaning SØIK has dropped cases against all leading bank executive who were suspected by police in March 2019.

Around 1,500 billion kroner from foreign customers flowed through the Estonian division of Danske Bank between 2007 and 2015, an investigation found.

A large proportion of that money is considered to be suspicious. The scandal resulted in Borgen’s resignation as CEO and the bank closed its Estonian branch in 2019.

READ ALSO: More on the Danske Bank money laundering scandal