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.