https://www.barrons.com/articles/danske-bank-russia-money-laundering-1537378162

Danske Bank has admitted its money laundering problem was even worse. More than $200 billion worse.

As part of a team of international reporters last year, Barron’s helped expose about $1.2 billion in suspicious funds that had flowed from Russia through a branch of Danske Bank— Denmark’s largest financial institution. On Wednesday, the bank (DANSKE.Denmark) made publicits own investigation of its branch in Estonia. And Danske estimates that the total of possibly-laundered money amounted to 200 billion euros, or about $230 billion.

Danske’s chief executive Thomas Borgen also submitted his resignation with the announcement. “It has been clear to me for some time that resigning would be the right thing to do,” he said in a statement, “but I have held off the decision, because I have felt a responsibility for seeing the bank through this difficult period towards presentation of the investigations.”

Danish prosecutors are investigating the mess, but the bank’s report maintains that Borgen, along with Danske’s chairman and other directors, did not breach their legal obligations toward the bank. The bank also says it will donate its estimated profit on the transactions — about $230 million — to charity. And it took the occasion to warn that the donation and Danske’s weak business overall now compel it to trim its guidance on 2018 earnings, from about 19 billion kroner, or about $3 billion, to 16-17 billion kroner, or $2.5-2.66 billion.

Danske Bank acquired the Estonian operation when it bought Sampo Bank in 2007. The unit in Estonia did little lending, Danke’s report says, and mainly earned profits by conducting electronic funds transfers and currency exchange for non-Estonian customers seeking to access western banks. Like many Baltic banks, Sampo’s Estonian branch had historic ties to Russian customers and maintained its own computer systems and records in Russian and Estonian — all outside Danske’s anti-money laundering compliance oversight. An inside whistleblower came forward in late 2013, the report says, and Danske realized that all its lines of defense had failed: Suspicious customers and transactions were practically unchecked at the Estonian unit. At that point in time, Danske, says that 44% of its Estonian branch’s deposits were from non-Estonians.

There were almost 10 million suspicious transactions over nine years, the Danske report says, involving some 15,000 customers. The bank says it has examined about 6,200 customers so far and that “the vast majority of these customers have been deemed suspicious.” Suspicious activity reports have been submitted to Estonian authorities, but Danske Bank cautions that such intelligence reports don’t mean the customers or their transactions were laundering money or involved in crimes. More than 40 employees and outside financial professionals were involved in the transactions, and Danske has reported eight of its own former employees to Estonian police.

Danske blames its lapse on the distraction and cost-pressures of the 2008 financial crisis, and admits it failed to follow up on warnings it got shortly after the 2007 acquisition. At the time regulators in Russia and Estonia mentioned possible money laundering amounting to billions of rubles monthly, money they said was connected to “criminal activity in its pure form.”

The hedge fund investor and human rights activist Bill Browder had also petitioned Estonian regulators with his suspicions of Russian money laundering at the Danske branch. Another missed opportunity came in 2013, when a western bank ended its dollar-clearing relationship with the Estonian unit on money laundering suspicions. But even after a whistleblower’s “disturbing” warnings in late 2013, Danske says it failed to fully investigate the Estonian branch’s activities until the 2017 media reports coordinated by the not-for-profit Organized Crime and Corruption Reporting Project. The bank then commissioned an internal investigation by the Danish law firm Bruun & Hjejle.