Illicit transactions via Denmark's Danske Bank, accused of laundering Russian money through its Estonian subsidiary, are on a far larger scale than originally thought, says CEO Ole Andersen.
"The issues related to the portfolio were bigger than we had previously anticipated," Andersen told AFP. "We take the matter very seriously, and are committed to understanding the full picture," he added.
A Wall Street Journal (WSJ) report stated US$150 billion had transited Danske Estonia "from companies with ties to Russia and the former Soviet Union", 2007-2015.
Danske Bank's share price dropped 4.11% to 177.15 Danish Kroner after the news, in an otherwise stable Copenhagen stock market.
Country's largest lender
In early August 2018, the Danish state prosecutor's office for serious economic crime said Danske, Denmark's largest lender, was being investigated and pressing charges was under consideration.
Danske has launched two internal probes of its own, planning to publish findings before month end.
Sums involved in the Danske case started to emerge in the media in early 2017. An initial estimate of €1.6 billion had risen to €7 billion, around a third of Estonia's GDP (and 3% of that of Denmark), in July 2018, reaching €30 billion by September. The revised statement of US $150 billion (a little under €130 billion) still may not be the ultimate figure.
Role of Deutsche Bank
Meanwhile Bloomberg News, who were instrumental in bringing the story to light, has said that without the actions of another major bank, Deutsche Bank AG, the flow of illicit billions through Danske Estonia may have been even higher.
While not immune to facilitating some suspect money flows itself, Deutsche Bank started rejecting individual dollar transactions going through Danske's branch in Tallinn in 2014, and completely withdrew its services in 2015, according to Bloomberg, quoting an unnamed source.
This was followed by a dramatic reduction in non-resident flows, according to a confidential report by Promontory Financial (commissioned by Danske) and published in Danish daily Berlingske.
US$30 billion in peak year
Deutsche's decision to stop offering services coincided with the Estonian regulator warning Danske of suspect transactions. Deutsche have declined to comment on the matter.
Deutsche Bank was itself fined almost US$700 million in 2017 after enabling US $10 billion dollars in transactions out of Russia and acknowledges that its anti-money laundering processes remain "too complicated."
According to Berlingske and UK daily Financial Times, which cite the Promontory report, flows through Danske Estonia peaked at US$30 billion per year in 2013.
Analysts have however noted that since flows don't always equate to suspicious transactions, the data is difficult to interpret.
Much of the laundered money may have been connected to a massive scale fraud uncovered by Russian lawyer Sergei Magnitsky in 2007. Mr. Magnitsky died in custody in Russia in November 2009 after 11 months' incarceration, where he was reportedly beaten and received inadequate treatment for various health issues.
This summer Mr. Magnitsky's former boss, American Bill Browder, filed a criminal complaint against Danske, saying that money laundered through the Estonian branch was "absolutely" blood money.
The ''Magnitsky Act'', introduced in the aftermath by the Obama administration, authorises the US government to sanction human rights offenders, freeze assets, and make entry bans.
As stated, the peak year for money laundering throughflow at Danske Estonia was 2013, some years after Mr. Magnitsky's death. Not all of the money laundered came from Russia; other countries of origin include Azerbaijan.
Danske Bank began a phased withdrawal from the Baltic market in April 2018.
Editor: Andrew Whyte