Tuesday 19 February 2019 2:56 pm

Danske Bank ordered to shut Estonian branch amid money laundering scandal


Reporter at City A.M. covering banking, markets and insurance

Reporter at City A.M. covering banking, markets and insurance

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Estonia has ordered Danske Bank to shut its local branch by the end of the year as investigations into an alleged €200bn money laundering scandal widen.

The Danish bank has also decided to close down banking activities in Russia, Latvia and Lithuania, which it said was following a strategic review.

Read more: Troubled Danske Bank's profits slip in wake of money laundering scandal

Authorities in Estonia, Denmark, the UK and the US are investigating the bank over an alleged the scandal involving non-resident clients at its Estonian branch between 2007 and 2015.

An investigation carried out by a law firm found red flags on “almost all” of the customers in the bank’s non-resident accounts, referring largely to Russian money, and that Danske Bank employees likely colluded with customers to avoid anti-money laundering controls.

Estonia’s Financial Supervision Authority (FSA) ordered Danske Bank to close down its Tallinn branch earlier today and said the bank agreed.

It also gave the bank eight months to repay customer deposits in full.

FSA chairman Kilvar Kessler said: “We have every right to put an end, once and for all, to this as large-scale violations of the local rules have been committed and this has dealt a serious blow to the reputation of the Estonian financial market,”

Just hours before the Estonian regulator made its dramatic move, the EU banking watchdog launched an investigation into their actions during the scandal, and the action of Danish regulators.

Read more: Danske Bank faces shareholder action over money laundering scandal


The European Commission had written to the European Banking Authority urging the regulator to use its powers to investigate whether the authorities had breached EU law.

Danske Bank interim chief executive Jesper Nielsen said: “We acknowledge that the serious case of possible money laundering in Estonia has had a negative impact on Estonian society, and we acknowledge that the Estonian FSA, against this background, finds it best that Danske Bank discontinues its Estonian banking activities.”

 

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