Danske crisis: The blowback from putting ‘$230b’ in headline

Bloomberg

The financial regulator at the epicenter of Europe’s vast dirty money scandal says a key part of what really happened has been misunderstood.
Danske Bank A/S became the modern-day poster child for Russian money laundering after it published a report in September that revealed a shocking number: $230 billion.
Jesper Berg, the director general of the Financial Supervisory Authority in Denmark, says interpreting that number correctly has proved difficult for those looking at the case. He says that’s in part because there’s not really any precedent for a lender putting so much information out there, the way he says Danske did.
“The numbers Danske Bank published are all the flows through the non-resident accounts, because those are the numbers you have,” Berg said in an interview in Copenhagen. “Those published by any other banks are numbers narrowly identified as money-laundering related to traditional crime.”
Denmark’s biggest bank said last year that a large part of 200 billion euros, or just under $230 billion, that flowed through a non-resident unit in Estonia from 2007 to 2015 should probably be viewed as suspicious. Berg calls the Danske numbers “different animals” from those “in other cases, where you could pinpoint that this is from a drug lord, for example.”
The number includes “everything going through these accounts,” Berg said. “A lot of it is capital flight and a lot of it is tax evasion. You don’t really know at the end of the day what’s more traditional crime.” He says there may never be any clarity on how much of the full amount was
actually laundered.
Bill Browder, the Hermitage Capital Management co-founder best known for chasing money launderers, says, “Danske Bank has exposed itself and said, ‘Lo-ok, we had a big problem.’” Wh-ile that degree of transparency can come at a political cost, it may ultimately serve Danske well, according to Browder.
“The most important constituency is the US regulator,” he said. “Because if the US regulators see there was a pocket of problems somewhere which has been identified, dealt with, and they’re taking measures to address the problem, that will look a lot better to the US authorities than to say, ‘We’re not going to tell you there’s a problem.’”
Danske’s all-encompassing number was a show-stopper that drew condemnation from politicians, investors and the general public. Its shares plunged 47 percent last year as shareholders recoiled from the scandal.
It seems other banks are already learning from the experience. Swedbank AB, Sweden’s largest mortgage lender, reportedly handled over $100 billion in questionable transactions tied to the Danske case. But the revelations have all come from Swedish media.
Swedbank commissioned a report that looked into 50 accounts, but refused to provide any numbers in the redacted document it published. The bank is now planning a second report. But its acting chief executive officer, Anders Karlsson, says that “one thing that you learn from this is that it needs to be forensically evidenced, it needs to be facts.” For that reason, he says it’s not clear that Swedbank will ever disclose any numbers.
Danske’s report, which took a year to complete, identified about 9.5 million payments. Those cover transfers by external parties to non-resident customers in Estonia who, over a nine-year period, then sent the money on to recipients outside the bank. The probe estimated this “flow” at about 200 billion euros.