Danske Bank A/S handled as much as €8.5 billion in mirror trades for Russian customers in one year, the Financial Times reported, citing an internal memo.
The Danish lender's share price fell more than 9% in morning trade after the report, published Oct. 5, revealed that it had earned €10 million from these trades, which used Russian government bonds to allow customers to make overseas payments.
The bank's memo acknowledged such transactions bring reputational risks but also noted that "[g]iven the strong income from the solution, the risk-return is seen as very attractive."
Although the memo is undated, it carries similar language to a memo referred to by Danske in its internal report, the FT said. The same report revealed that a significant part of some €200 billion that flowed through the bank's Estonian branch was "suspicious."
Mirror trades, in which Russian customers can buy securities in rubles then sell identical ones for other currencies such as the U.S. dollar, are not necessarily illegal, but are often seen as signals for potential money laundering.
Graham Barrow, the specialist who examined suspicious accounts at the bank, previously told S&P Global Market Intelligence that the mirror trades could increase the scale of any fine imposed by regulators on the bank.
Danske has already taken steps to anticipate the amount of fines it could pay resulting from the scandal, raising its capital backstop to at least 10 billion Danish kroner, after a recommendation by the Danish Financial Supervisory Authority. The bank also admitted that it is in talks with the U.S. Justice Department over the scandal.
As of Oct. 4, US$1 was equivalent to 6.48 Danish kroner.