Danske Bank ‘allegedly used’ to launder $8.3bn in funds

Bloomberg

Danske Bank A/S’s Estonian operations may have been used to launder as much as $8.3 billion in a case that has rocked Denmark and triggered calls for tougher penalties from the country’s political establishment.
The amount, which represents roughly a third of Danske’s market value and almost 3 percent of Danish GDP, is more than double that previously estimated, according to figures first reported by Berlingske and confirmed by Bloomberg. The alleged illicit transactions span the years 2007 to 2015.
Shares in Denmark’s biggest bank opened more than 3 percent lower in Copenhagen on Wednesday, making Danske the day’s worst performer in the Bloomberg index of European financial stocks, which was little changed.
“It’s not clear what the consequences might be as the volume of this case is much bigger than anyone could have imagined,” said Christian Thatje, an equity dealer at Sydbank A/S. “This case brings a lot of uncertainty and investors don’t like that.”
Danske Bank’s riskiest euro and dollar bonds also lost ground on Wednesday morning. The 7 percent dollar contingent convertible bond dropped a cent to 97.1 cents on the dollar, while the 5.76 percent euro CoCo fell to its lowest level since January 2017.
It’s not known who exactly is behind the transactions, but previous leaks showed money made its way from Russia, Moldova and Azerbaijan through Dans-ke’s laundromat. The laundering is also thought to have involved funds linked to an illicit scheme exposed by Sergei Magnitsky, an auditor who died in custody in Russia in 2009.
Bill Browder, who was expelled from Russia in 2005 after his firm Hermitage Capital Management released documents it said exposed corporate and government corruption, said he will use the latest allegations against Danske as the basis for an official complaint.
“We are working on a new criminal complaint including these discoveries, which we intend to file with the Danish and Estonian law enforcement authorities shortly,” Browder said by email on Wednesday.
Danske Bank expects to release the findings of an internal investigation of the money laundering breaches in September. Before Wednesday, the bank had said it can’t comment fully until the results of that probe are ready.
After the latest allegations, Danske’s Head of Group Compliance Anders Meinert Jorgensen, said “it is too soon to draw any conclusions about the extent of the potential money laundering in Estonia.”
“That is the reason why we have not ourselves published figures or commented on speculations about potential amoun-ts. On several occasions, howev- er, we have said that the extent seems to be somewhat larger than previously estimated,” he said by email.
The bank is continuing to cooperate with the authorities and provide material “on an ongoing basis to the extent that this has not already been done,” Jorgensen said.
Jesper Nielsen, head of banking in Denmark at Danske and a member of the executive board, said the laundering investigation is taking up a “big chunk of management’s time,” in an interview conducted before the latest allegations became public. “Obviously it takes some time and gives us some worries in terms of how we are perceived in the market,” Nielsen said. “This impacts the story around Danske Bank.”

ONGOING INVESTIGATIONS
Danish Business Minister Rasmus Jarlov said this week the bank’s internal probe won’t be enough to satisfy the government, and said he was awaiting the findings of other investigations. The government and central bank have said the case risks hurting the reputation of the whole country, which has otherwise been associated with extremely low levels of corruption.
Danske was reprimanded in May by the Financial Supervisory Authority in Copenhagen and ordered to hold an additional 5 billion kroner, or $781 million, in regulatory capital, among other disciplinary mea-sures. CEO Thomas Borgen has publicly apologised for the bank’s failure to act sooner.