Danske Bank is facing a fresh investigation by Estonian financial regulators amid a growing scandal for Denmark’s largest lender and its management over money-laundering allegations. The Estonian Financial Supervision Authority on Tuesday said it would investigate whether Danske had failed to provide information about allegations of money laundering linked to the Russian elite and intelligence services.
Estonian regulators first investigated Danske over alleged money laundering in 2014. The probe increases the pressure on Danske’s senior management, who are facing an increasing outcry from Danish politicians about why the lender did not act more quickly to sort out problems in its Estonian business.
Danske has faced a spiralling series of allegations from Danish newspaper Berlingske that lax controls in its Estonian operations led to potential money laundering from the likes of Azerbaijan, Moldova and Russia. Jeppe Kofod, an opposition Social Democrat MEP, said Danske was facing “a world-class scandal”.
He added: “The affair highlights a total lack of responsibility at Danske Bank as well as the authorities in Denmark, Estonia and the EU.” Danske started its own investigation in September that is due to be finished later this year. It also appointed Jens Madsen, the former head of Denmark’s intelligence agency as well as ex-chief of its fraud squad, to head a new compliance incident team.
It also admitted to “major deficiencies in control and governance” in Estonia that allowed its branch there to potentially be used for money laundering. But some Danish politicians argue that is not enough. Lisbeth Bech Poulsen, an MP for the opposition Socialist People’s party, said: “It is clear that Danske Bank cannot or should not investigate itself.
It is therefore time that the Danish financial regulator and anti-fraud police take charge.” The Danish FSA said it could not comment on whether it was investigating Danske or not. It added that the supervision of Danske’s Estonian branch for money laundering was in general a matter for Estonian authorities but that the Danish regulator could become involved if the allegations were so serious that they raised questions about management and governance.
Anders Jorgensen, head of group compliance at Danske, said: “We are not able to comment in details on our dialogue with the authorities. However, we have a constructive dialogue with the Estonian authorities. We have launched a thorough investigation to get to the bottom of the events at that time in our Estonian branch.”
Thomas Borgen, Danske’s chief executive since 2013, called the lack of controls in Estonia “deeply regrettable and completely unacceptable”. Danske was in December fined DKr12.5m ($2m) by Danish authorities for violating anti-money laundering rules unrelated to the specific allegations in Estonia.
Berlingske newspaper reported this week that Danske’s senior management was informed in 2013 by a whistleblower of allegations that a relative of Russian president Vladimir Putin and Russia’s intelligence services were behind money laundering in the bank’s Estonian branch. Latvia is another Baltic country in the spotlight over potential money laundering after the enforced collapse of its third-largest bank over the weekend.