Europe wakes up to risks after Danske Bank scandal

Bloomberg

Europe can’t allow itself another money laundering scandal like the one engulfing Denmark’s biggest bank, according to a growing list of regulators, legislators and even bankers now demanding better region-wide controls against such crime.
Rasmus Jarlov, the minister in charge of financial legislation in Denmark, says the example of Danske Bank A/S is one from which Europe needs to learn. The lender is now the target of criminal investigations in Denmark and Estonia amid allegations that as much as $9 billion, mostly from Russia, was laundered through its Estonian unit between 2007 and 2015.
Jarlov says it’s “absolutely” clear that there are “lessons that can be drawn from as significant a case as this one.” He also says he’s sure that there’ll be an exchange of information from the Danske case within the European Union, with the idea being to “ensure that we do all we can in Europe to prevent another” such case.

‘Illegal Acts’
The minister, who has been looking into the allegations against Danske together with Estonian authorities, says it’s now clear the amounts of money in question are “enormous.” He also says that “a lot suggests that things have happened that are illegal,” as investigators sift through the evidence.
Europe has seemed unprepared for the stunning revelations of large-scale money laundering apparently committed under its watch. Danske is just the latest bank found to have had inadequate procedures in place to prevent laundering, with the list including Deutsche Bank AG and ING Groep NV.
In May, EU First Vice President Frans Timmermans, Vice President Valdis Dombrovskis and Commissioner Vera Jourova asked Europe’s three supervisory agencies and the European Central Bank to find ways to improve cooperation between bank supervisors and anti-money laundering authorities.
The region’s biggest banks are also demanding better protections. Next month, the euro zone will get its eighth global systemically important bank, Nordea Bank AB. Its management is asking authorities in the bloc to consolidate anti-money laundering defenses.
Julie Galbo, chief risk officer at Nordea and a former regulator at the Danish Financial Supervisory Authority, says the problem with the current setup is that it relies on too many different legal interpretations and national agencies. As an example of holes in the system, Galbo notes that if one bank stops doing business with an entity it has identified as suspicious, there’s very little in Europe right now preventing another bank from picking up that business.
“You don’t have a body in Europe that harmonises these things, you don’t have a body in Europe that supervises anti-money laundering implementation,” Galbo said. The “biggest effect” from coordinating regulation and monitoring at a European level would be “that you avoid arbitrage.”
An Aug. 31 EU analysis obtained by Bloomberg highlights some of the problems and underlines the need for greater centralisation of powers to fight financial crime.