Graham Barrow, a money laundering expert involved in uncovering alleged money laundering at Danske Bank A/S, has said $1 billion in suspicious money flowed through a single account at the bank in just over a year, which should have caught regulators' attention.
Danish newspaper Berlingske in the last week of July 2 cited leaked bank documents to claim that the suspicious money flowing through 20 accounts at Danske's Bank's Estonian branch between 2007 and 2015 could be more than double its previous estimate, at $8.3 billion. The paper claimed in 2017 that Danske Bank's Estonian branch was behind the laundering of $3.9 billion of suspicious transactions from Russia, Azerbaijan and Moldova.
Barrow, who has worked on money laundering projects for HSBC and the U.K. financial regulator and is on assignment at Deutsche Bank, examined six of the bank accounts for the newspaper.
In one instance, Barrow found an account held by an unnamed U.K. limited liability partnership that during 14 months received a number of large deposits in various currencies, including nearly $750 million, nearly €300 million and £1.5 million.
After being deposited into the account, most of the money was swiftly remitted to other U.K. LLPs. The same holders of the initial account had set up the other partnerships, which are all registered at the same addresses.
Barrow told S&P Global Market Intelligence that unexpected or unlikely links between either side of a commercial transaction often alert financial investigators that potential wrongdoing is taking place. In the Danske case, the close links between the partnerships and the account holders were "stretching credulity to breaking point," he said.
"You have to ask after the passage of $1 billion through an anonymous U.K. LLP with no internet presence, which pays no wages, rent or tax: Is it capable of turning over this much money in a year? Someone should have noticed something. The system is clearly not working," Barrow added.
"Back in 2008, would a bank's systems have been tuned to spot this activity? I think the answer has to be yes."
The six bank accounts were linked to 32 U.K. LLPs registered at Companies House, the public register of companies in England and Wales. All of the LLPs had overseas-designated members, 22 had the same members and 17 were registered to the same address, he said.
"What is it going to take to see the tipping point, for the authorities to take this seriously? Has a bank got to be fined out of existence? Companies House is not overseen by the regulator. There's only about six people working there. We make it catastrophically easy for some kleptomaniac Russian to set up a company here," he said.
Companies House said it "already works closely with law enforcement bodies to identify suspicious and potentially criminal activities. Companies House also has existing arrangements for information sharing with enforcement agencies to assist with investigations."
Denmark's financial authorities have been spurred into action after Business Minister Rasmus Jarlov tweeted: "This gravely serious case will become much worse if the latest information is correct."
'1 krone too many'
There are suggestions that the government could confiscate profits Danske Bank has made in Estonia. Danske CEO Thomas Borgen previously was head of the bank's international operations, including the Baltic countries. Under European Union rules, national authorities rather than EU bodies retain control of policing money laundering.
Denmark's Financial Supervisory Authority has said the Danske Bank business in Estonia that does not involve domestic customers was equivalent to about 2% of its total profits, or $51 million.
Danske Bank said it is waiting for the result of an investigation by an external law firm into the situation, which is due to be released in September: "But there is no doubt that even 1 krone laundered is one too many, and that we take this matter very seriously," said Danske Bank spokesman Kenni Leth. "We cannot comment on specific businesses, but all customers in the Estonian portfolio, which was closed down several years ago, are [being] investigated."
The bank's woes are mounting, however.
On July 12, Finanswatch reported that William Browder, CEO of Hermitage Capital Management Ltd., has filed a formal complaint against Danske Bank with Danish authorities, accusing the bank of being a central player in the alleged money laundering scheme and described the Estonian branch of Danske Bank as "one of the main conduits related to the fraud uncovered by Magnitsky." Browder, whose lawyer Sergei Magnitsky was beaten to death in a Russian jail after uncovering an alleged $230 million fraud, has said he would also file criminal charges against Danske Bank in Estonia.
The Danske Bank scandal began unfolding only four months after the U.S. Treasury effectively forced the closure of Latvia's ABLV Bank AS, accusing it of "institutionalized money laundering" including helping finance North Korea's nuclear program.