The CEO of Danske Bank, Thomas Borgen, is to step down following allegations that the Danish bank laundered billions of mostly Russian cash through its Estonian branch.
In a statement Borgen said that Danske “had failed to live up to its responsibility” and that he “deeply regrets” the events. He will stay on at the bank until a replacement is found.
The bank has been unable to put a figure on just how much money may have been laundered but it estimates that as much as $234bn flowed through the bank’s Estonian branch between 2007-2015, the period in question. The sum, which is equivalent to nine times Estonia’s GDP, covered 15,000 accounts and almost half of these (6,200) have subsequently been reported to the authorities for showing the “highest risk indicators”.
The scandal has shocked the Danish public given that the country is generally known for low levels of corruption and high levels of transparency. It has also sent Danske’s share price tumbling further. It opened on Wednesday 6% down bringing its 2018 losses to 32%.
The case has also raised serious questions about risk control standards. The Estonian Financial Services Authority said that the report into the case showed that “risk appetite and risk control were not in balance”.
It had conducted an investigation into the bank in 2014 and ordered it to rectify flaws in its risk control systems, after which the bank stopped taking deposits from customers not resident in the country.
It remains to be seen if Danske will face examination from any other national authorities. Although no sanctions violations were reported, the possible involvement of Russian cash may well be of interest to US regulators.
Bill Browder, who set up Russia’s most successful hedge fund, Hermitage Capital, between 1995 and 2005, has long alleged that Danske Bank’s Estonian branch had been “one of the main conduits” related to the fraud.
Danske is not the only European bank to have been charged with money laundering failings. Credit Suisse was this week censured over its lax money laundering controls and its association with scandals involving football body FIFA.
Deutsche Bank was fined $700m last year for aiding wealthy Russians looking to move money out of the country. And ING last month paid $900m to settle a case over money laundering.