We pass by the façade of a prestigious bank, either in the U.S. or Europe or anywhere really, and we are persuaded to believe in their high ethical standards. Facades will do that. The edifice of the main branch of Denmark’s Danske Bank conveys that image as well. Danske Bank and Money Laundering – A Tale of Unethical Banking.
In September 2018, Danske Bank was found to have laundered about $226 billion through Eastern European accounts between 2007 and 2015. The individuals laundering the money through the Estonia branch are related to Russian President Vladimir Putin.
As I sit at my desk writing this, I feel many emotions, but the least of them is a surprise.
The new, interim director of the bank has made it clear that they will fully cooperate with the Danish State Prosecutor for Serious Economic and International Crime (SOIK).
“We did expect to be preliminarily charged by SOIK in continuation of the findings and conclusions of the investigations we presented in September this year,” said Jesper Nielsen, Danske’s acting chief executive officer, said in the statement. “We will, of course, cooperate with SOIK and make ourselves and the knowledge we have available in relation to the ongoing investigation.”
OK, We Admit It!
However, as the investigation goes on, there may be much more than the money deposited and laundered through the Estonian banking unit which is not much more than a small, non-descript branch. may need to be treated as suspicious. The bank, which is publicly-traded is already being investigated by the U.S. Justice Department. The stock price is down nearly 45 percent for the 2018 calendar year.
There are numerous charges against the bank brought on by SOIK that I will briefly summarize:
- The bank failed to have adequate controls over its branches including a lack of training in regard to money laundering.
- The bank “failed” to have procedures in place to determine if non-resident customers, such as their Russian customers moving huge sums of money were “politically exposed.” In fact, they didn’t have much knowledge about any of their non-resident customers.
- Danske Bank didn’t perform routine “research” as to who their non-resident customers were.
As the investigation has widened, it is no wonder Danske Bank readily admitted to the scandal. They may have felt that a quick agreement could lead to a minimization of the scandal. Now, the world of law enforcement, investment, and the courts are expecting many more “correspondent banks” to get drawn into the mess of their own making.
Thank the Whistle Blower
Howard Wilkinson once ran Danske’s Baltic trading unit. He saw things and he knew things. $226 billion is a lot of money to launder. Bankers and their traders work in a world unknown to most of us. He understood that much money simply doesn’t appear from anywhere. Wilkinson, under oath, has testified that at least seven other banks and many shell companies helped the Putin family launder their funds. Also named were Deutsche Bank AG, JPMorgan Chase & Co. and Bank of America Corp.
Why would the banks stick out their necks? Opportunity! Banks are not in existence to cash your mortgage payments. They move vast sums of money in and out of numerous exchanges, they loan massive amounts of money and in return, the lucrative returns on that money elevate stock prices and benefits executives. The opportunity exposes a need: many who have, want more, as though unethical decisions can be covered over with massive amounts of money.
Jesper Berg, the chief bank regulator for Denmark has stated that the Danske employees did almost nothing to disguise or research the origins of billions of dollars. They should have raised an eyebrow, at least, when the money was pouring in.
It wasn’t as though the unethical, politically-connected individuals, were showing up in Estonia with satchels of money. They sent money to four Russian banks and once that was done, the funds were sent to Danske’s Estonian branch. From there, the correspondent banks were only too happy to take chunks of the action knowing full well there might have been criminal activity behind it all.
As Wilkinson spilled the beans, he made the accusation that he was offered money by Danske Bank in return for his silence. There is no direct proof. He talked of shell investment companies fronting for banks in the U.K. The whistleblower is not without worry. He fears for his safety. $226 billion, and the income derived from it is a lot of money.
Rationalization
The employees of Danske Bank, correspondent banks and shell companies taking part in the fraud, and the relatives of the Putin family itself, all found a way to rationalize their behavior. They did so without regard for hundreds of thousands of investors, regulatory agencies or ethics itself.
It all comes down to a choice. Within Danske Bank’s infrastructure, someone made the decision to ignore the truth and to choose to do an illegal act. The consequences of their actions will taint the company for years. Danske Bank and Money Laundering – A Tale of Unethical Banking
