Danske Bank CEO Resigns on Heels of Report Detailing an Astounding $234 Billion in Suspicious Transactions in Money Laundering Scandal

Author:Jessica Case Watt
Law Firm:Ballard Spahr LLP
Publication Date:21 Sep 2018
Estonian “Non-Resident Portfolio” Produces Colossal Money Laundering Scandal

This week Danske Bank released a report detailing the results of its much anticipated internal investigation into allegations of money laundering perpetrated in its Estonian branch. The results of the investigation dwarfed even the boldest predictions. The report found between 2007 and 2015 the Estonian branch processed a staggering 200 billion Euros, or $234 billion, in suspicious transactions by thousands of non-resident costumers. The report finds the AML procedures at the Estonian branch were “manifestly insufficient and inadequate,” resulting in numerous breaches of legal obligations by the Estonian branch. The report details a numerous red flags that allegedly should have alerted the parent Danske Bank Group (“Group”) to the issues.

However, the report also concludes that the Group’s Board of Directors, Chairman, Audit Committee, or Chief Executive Officer did not violate any legal obligations in failing to detect or stop the suspicious transactions. Despite this finding, the CEO, Thomas Borgan, resigned the same day the report was released. Borgan stated, “Even though I was personally cleared from a legal point of view, I hold the ultimate responsibility. There is no doubt that we as an organization have failed in this situation and did not live up to expectations.” The consequences of this colossal money laundering scandal are unlikely to stop with Brogan’s resignation.

This blog post will summarize the scope of the report, findings of suspicious activity, the causes and red flags of potential money laundering violations, and outline the known and anticipated consequences of this scandal for Danske Bank.

The Scope of the Report

The 87 page report details the year-long investigation by the Danish law firm Bruun & Hjejle into the allegations of potential money laundering out of the Estonian branch. The scope of the investigation was massive: collecting information on 87 million payments over a 10 year period for all customers at the Estonian branch. Importantly, the review looked at 10,000 non-resident customers that were known to the bank and included in a specially managed “Non-Resident Portfolio” in Estonia until 2015. The review also looked at an additional 5,000 customers of the Estonian branch that were not in the portfolio but qualify as non-resident customers. In addition, there was an investigation into the accountability for failure to detect the suspicious activity, which include interviews of 49 individuals.

Findings of Suspicious Activity in Estonia

The primary focus of the report is on the transactions of non-resident customers, including those in the Non-Resident Portfolio, “a pool of non-resident customers managed within the Estonian branch by a designated group of employees.” This Non-Resident Portfolio at the Estonian branch dated back to the 1990s, prior to Danske’s acquisition of the branch in 2007 as part of its purchase of the Finnish Sampo Bank. The Non-Resident Portfolio customers were both private persons and corporate entities, with a small number that were “non-regulated entities acting as intermediaries providing cross-border payment solutions to unknown end-clients in Russia and other CIS countries.” Per year the customers in the Non-Resident Portfolio accounted for 2-4% of the total customers of the Estonian branch. Yet, these customers in the Estonian branch accounted for a significant portion of the deposits made in the entire Danske...

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