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Estonia Expels Danske Bank in Response to Historic Money Laundering Scandal. Estonia Expels Danske Bank in Response to H

On February 19, 2019, the Board of Estonia’s Financial Supervision Authority issued a precept to Danske Bank to prohibit the activities of the bank’s branch in Estonia. The Bank must cease its activities in Estonia within eight months of the issue of the precept, taking into account the interests of its current customers.

There is no change at the moment for the customers of Danske Bank Estonia branch, all customer contracts are valid. The reorganization of customer relationships is gradually taking place within eight months. The Bank is asked to return all deposits to its customers in full.

Must Transfer the Loan Agreements

At the same time, the bank may not force the existing loan customers to repay the bank early or cancel the loan agreements only on the pretext of the precept.

Danske Bank must transfer the loan agreements of the branch within eight months to another independent bank or other creditor with the right to operate in Estonia, or to resell the loans or apply any other legal solution that allows the loan contracts to be executed, while taking into account the protection of the rights of the borrowers. As of the end of 2018, the Bank has nearly 14,700 deposit customers and 12,300 loan customers.

Misled the Estonian Public Authorities, $226 billion USD Laundered

Danske Bank violated anti-money laundering regulations for many years by operating high-risk money-laundering clients to make suspicious transactions through the bank. In addition, Danske Bank misled the Estonian public authorities by providing them with inadequate information and thus actually hampered their activities.

The actual scope of Danske Bank’s violations was revealed in autumn 2018 by Danske Bank’s in-depth internal investigation reports prepared by the Bank under public pressure ($226 billion USD laundered).

The Financial Supervision Authority, after publishing the reports, on-the-spot checks carried out at the bank and a thorough analysis of the information received from the Estonian Financial Intelligence Unit, has concluded that the bank must cease its activities in Estonia.

According to Kilvar Kessler, Chairman of the Financial Supervision Authority, Danske Bank’s undoubtedly serious violations over the years and the credibility of the Estonian financial environment have to be given a unequivocal condemnation, which to a certain extent is mitigated by the Bank’s admission of violations, even though it started with public pressure.

“The situation where such serious and extensive violations of local rules have been committed through the branch of a foreign bank and has resulted in the greatest blow to the transparency, trust and reputation of the Estonian financial market and where we believe that the country of origin has treated the bank in silkworms, is hopefully the ultimate point of exception in the final case.”,

Said Kessler, adding that in the past, the Financial Supervision Authority reacted to the activities of Danske Bank as the only institution in Estonia and Denmark, and forced the bank in 2015 to give up the non-resident business in Estonia in the light of the evidence at that time.

“In order to protect the interests of our clients, we decided to impose a duty on the bank with a fine imposed by the Financial Supervision Authority. In case of a breach of the precept, the bank will have to pay 100,000 euros per day for each violation until execution, but not more than 10 percent of the total annual net turnover of Danske Bank, ”

noted Kessler.

Danske Bank must submit to the Financial Supervision Authority an action plan for closing the branch in Estonia within 20 days. The Financial Supervision Authority closely monitors the process of liquidation of the branch and is ready to use additional supervisory measures, if necessary, to ensure the protection of the interests of the clients of the branch and the reliability of the financial sector.

Danske Bank will Exit Latvia, Russia, and Lithuania as Well

Danish lender have announced that they are choosing to exit Latvia, Lithuania, and Russia after Estonian Authorities ceases their operation in Estonia.

Director at Dynamic-GRC, Adrian Pay, said: “This is a huge blow to Danske Bank and a bigger warning to other banks that bad AML can decimate their global business.

Some stats about Danske Bank and the AML violations. Insights by Jon Honkamäki, Managing Partner at 0x Relayer:

  • The largest bank in Denmark (53rd largest globally)
  • 148 years old (founded 1871)
  • Employs almost 20k people
  • Laundered 200,000,000,000€ ’07-15 (200 billion Euros, $226 billion USD)
  • Nobody has been convicted (on-going investigation)
  • Nobody has taken the blame (CEO stepped down, but doesn’t admit crime)
  • The investigation only started because of a whistleblower (head of Danske Bank’s trading unit in the Baltics from 2007 to 2014).
  • Estonia’s financial regulator ruled Danske to close it’s Estonian Branch, pay back people the money and leave the country.

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