The Danish bank’s problems began in 2007 when it acquired Sampo bank, a small Finnish firm with a non-resident portfolio in Estonia.
Over the following nine years, this Estonian branch was used to launder a trans-national collection of money, including: 32 different currencies, companies from Cyprus to Seychelles and with the branch’s customers being traced back to Ukraine and Russia.
One of the schemes ran through the Estonia branch reportedly involved the ruling elite of Azerbaijan, former Soviet money and almost £3 billion used to lobby and pay-off European politicians.
As one would expect, Danske Bank had a strict anti-money laundering policy designed to prevent the risk of scandals like this arising. The policy and procedures designed to deal with money laundering include using sophisticated IT management systems to flag up suspicious transactions or individuals of interest automatically. The robust system, however, was not implemented at the Estonia branch.
Nordic institutions have often been applauded for their governance model characterised by openness, trust and responsibility but this money laundering scandal has already had dire consequences for both the bank and its staff.
In September, the bank’s then CEO, Thomas Borgen, resigned his position following an internal investigation into transactions at the Estonian branch between 2007-2015 stating, “Even though the investigation conducted by the external law firm concludes that I have lived up to my legal obligations, I believe that it is best for all parties that I resign.”
The scandal has already had a significant impact on the bank’s bottom line with their share price plummeting 45% since the news broke – reducing the company’s value by over £14 billion.
It is crucial to remember that this latest scandal is not a victimless crime. It can be difficult to put into perspective the enormous sums at play to fully understand the impact that large-scale financial crimes, such as money laundering and tax evasion can have.
The National Crime Agency estimates that money laundering costs the UK economy £24 billion a year and globally and $1.5 trillion is laundered annually.
As the Telegraph explains, “companies are used as layers to hide money that would otherwise appear suspicious with many registering in the UK because it is seen as a respectable place to do business.”
The risk of being caught in a situation of concern relating to money laundering may not sit with your own business or operation but may arise from those you trade with. It is not just regulated businesses that need to be conscious of money laundering and offences pursuant to the Proceeds of Crime Act 2002 (which includes offences relating to money laundering).
At Tenet, we are committed to finding better ways of reducing the risk of exposure to fraud and wider financial crime – both its prevention and its remedy. If you’re concerned whether your business is susceptible to fraud, please get in touch.