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Many Major Banks have Money Laundering Cases

18 of Europe’s 20 largest banks have been penalised for violating money laundering rules in recent years. From 2012 to 2018, banks in the EU have paid more than DKK 100 billion in fines for not having controls for fighting money laundering.

3. Jun 2019
5 min

​While Danske Bank is awaiting its penalty for "the largest money laundering scandal in Europe" in its Estonian branch, experts know that the largest bank in Denmark is far from the only member of the club of European banks with money laundering problems.

In autumn, the British company Fortytwo Data, which sells anti-money laundering solutions based on artificial intelligence, figured that 18 out of Europe's 20 largest banks have already been penalised for violating money laundering rules. "It is clear that the largest banks in Europe are collectively struggling with problems with handling money laundering rules", Fortytwo Data concluded in a press release.

And according to a new report from the credit rating agency Moody's, EU banks have paid over DKK 100 billion in fines between 2012 and 2018 alone due to violations of money laundering rules. Notably, these have mainly been to American, not European, authorities – which we will return to.

"Money launderers use a weak entry point to get money into the EU and then reinvest it in European real estate or other assets, but they also send it out of the EU again. Because once you've gotten an 'EU stamp', it's much easier to move money around within the EU or the rest of the world", money laundering specialist Laure Brillaud from the NGO Transparency International tells Magasinet Finans.

Swedbank was misleading

Besides Danske Bank – which let 200 billion euros flow unchecked through the bank's Estonian branch – several Nordic competitors are also at risk of being fined for letting their Baltic branches be used for money laundering from former Soviet republics.

According to documents leaked to Sveriges Television, Sweden's oldest bank, Swedbank, has processed questionable transactions totalling 135 billion euros through the bank's Estonian branches. A small portion is believed to be transactions to and from Danske Bank's Estonian branch.

Swedbank's Danish chief executive, Birgitte Bonnesen, pointed out that the bank's Estonian branch – unlike Danske Bank's – did not deal with foreign customers. "Swedbank is completely different. We have retail banking in four countries. We focus on domestic companies and domestic private customers", Birgitte Bonnesen told the TV station CNBC.

"The information paints a picture of Swedbank seeming to have spread misleading information to the public and the market about what the bank knew about suspected money laundering through Swedbank in the Baltic states", the Swedish financial crimes bureau concluded when it raided the bank in late March.

Bank closures in the Baltics

Scandinavia's largest bank, Nordea, is also suspected of being involved in money laundering in the Baltics. In March, the public Finnish TV station Yle revealed that transactions of 700 million euros – some allegedly suspicious – flowed through the bank's Estonian branch.

This happened in the context of the scandal known as the "Troika Laundromat", where the Russian investment bank Troika Dialog particularly, but not only, used the Lithuanian bank Ūkio Bankas to get an estimated 4.6 billion dollars into the EU through an intricate system of bank accounts and counterfeit invoices. As Lithuania was not yet part of the eurozone, Ūkio used correspondent banks such as the Austrian bank Raiffeisen or German bank Commerzbank to handle euro transactions.

According to the Organized Crime and Corruption Reporting Project (OCCRP), a league of over twenty media outlets behind the disclosures, these correspondent banks sporadically requested transactions from Ūkio Bankas.

"We have a contract (attached), but to be honest, I don't really understand what's going on", one of Ūkio's controllers wrote in response to an email that OCCRP got hold of. The email was about payment to a company associated with the cellist Sergei Roldugin, a good friend of Russian President Vladimir Putin, who, according to the consortium of journalists, received 69 million dollars via the "laundromat".

Both Ūkio Bankas and the national competitor Bankas Snoras are now closed because of the scandal. The same is true for the Latvian bank Trasta Komercbanka, which was involved in an even larger money laundering scandal back in 2014 and is known as the "Russian Laundromat". And last year, it was the Latvian bank ABLV's turn after U.S. accusations of similar money laundering activities.

The U.S. and journalists behind the discoveries

Laure Brillaud from Transparency International points out that the scandals in recent years have been discovered either by U.S. authorities or journalists, but rarely by European authorities:

"National authorities in the EU are known for only imposing minimal fines on their leading national companies. It is not normal for us to have our American partners point out the rotten apples in our cart".

According to the credit rating agency Moody's, the U.S. is behind over 75 per cent of the fines banks in the EU have had to pay since 2012 for violating money laundering rules.

Two notable exceptions are ING, which settled with the Dutch Prosecutor's Office for 775 million euros for not having verified account holders' identities for years, and the Swiss investment bank USB, which was fined 4.5 billion euros (34 million DKK) by a French court in February for money laundering under the aggravating circumstances of profiting from tax fraud and illegal banking.

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