COPENHAGEN • Europe faces a sobering reality as it steps up its fight against money laundering.
In recent months and years, some of Europe’s biggest banks have been caught and, in many cases, fined for their involvement in shady transactions. The list includes Deutsche Bank AG, ING Groep NV and BNP Paribas SA. But there’s a lot more that has yet to be caught.
“The big issue in this part of the world is money that wants to get out of Russia,” Jesper Berg, the DG of the Financial Supervisory Authority (FSA) in Copenhagen, which oversees Danske Bank A/S, said in an interview. “And that problem is still out there.”
Danske has become something of a poster child for Europe’s laundromat. The bank, which is at the centre of a US$230 billion (RM959.1 billion) scandal, is accused of letting a branch in Estonia help thousands of suspicious clients in the former Soviet Union transfer illicit funds into the West. The dodgy flows, which continued into 2015, started even before Danske bought the Estonian unit in 2007, Berg said.
The US Justice Department is investigating the case and Danske said recently it has so far already built a US$2.7 billion buffer to help it absorb potential fines. The Danish and Estonian FSAs are also being investigated by the European Bank- ing Authority for failing to stop the suspicious flows earlier.
Berg, who has run the Danish FSA since late 2015, said the fault line in Europe for suspicious flows is the geographical belt that separates the West from the former Soviet bloc. “Historically, banks that have benefitted from such capital outflows, for example from the former Soviet Union, have typically been located in countries that border the region,” he said.
The central bank in Estonia has published figures showing that Danske accounted for a “large” portion of the cross-border flows that include the potentially suspicious non-resident transactions.
With a lot of Europe’s biggest banks finally building up their defences against suspicious transactions, Berg said money launderers will instead turn to smaller lenders. He also said he expects that other regulators are looking into whether the firms they oversee have been tainted by the Danske scandal.
Denmark’s state prosecutor last month brought the first criminal charges against Danske, focusing on its failure to adequately screen suspicious clients. The bank has also acknowledged it can’t rule out that entities on US sanctions lists might have used its Estonian branch.
“In terms of figuring out what was actually laundered at (Danske), I doubt we’ll ever get that figure,” Berg said. “That would require the Financial Intelligence Units of Russia and Estonia to work together, and I don’t think that’s very likely.” — Bloomberg