Transparency International welcomes the European Banking Authority’s decision to investigate the Danish and Estonian financial supervisory authorities concerning their work over Danske Bank. Responding to a request from the European Commission, the regulator announced yesterday it will seek to determine if the two have breached European Union law by failing to act upon the apparent money laundering through the Bank’s accounts.
“We expect for this investigation to confirm that both financial supervisors have failed to protect the European Union and, by extension, our interconnected world, from dirty money,” said Maíra Martini, Knowledge Coordinator at Transparency International. “The European Union will need to identify all at fault in order to learn from this bitter lesson.”
Following the decision, the Estonian financial supervisor promptly ordered Danske Bank to close its notorious Tallinn branch, stating that the scandal was “the greatest blow to the transparency, trust and reputation of the Estonian financial market.”
While both Estonia and Denmark received good marks on the Corruption Perceptions Index 2018, Transparency International highlighted how countries with the cleanest public sectors have been enabling grand corruption around the world. These two countries, in particular, have become easy targets of individuals and companies behind the illicit US$230 billion funneled through Danske Bank.
In 2014, well before courageous whistleblowers and investigative journalists unveiled the Danske Bank scandal, the Estonian financial regulator had a crucial opportunity to act when their inspections identified the branch’s failure to comply with anti-money laundering rules.
“The response of Estonia’s financial supervisory authority suggests that they do not accept responsibility for supervising banks operating in their territory,” Maíra Martini argued. "Shutting the branch down years later does not absolve them of the responsibility to investigate and stop billions in dirty money from flowing freely through its accounts. They should investigate and cooperate with the authorities to identify companies and individuals behind the money.”
Denmark’s financial supervisory authorities responded with a statement expressing disappointment that their Estonian counterparts were distancing themselves from a shared responsibility. However, it’s important to emphasise that Danish authorities have a responsibility to ensure all branches of Danish banks meet anti-money laundering standards, and that investigations continue into the failings in this particular case.
The scapegoating and the back-and-forth between the two authorities demonstrates the need for stronger EU-wide anti-money laundering supervision.
The Tallinn branch of Danske Bank is at the centre of Europe’s biggest money-laundering scandals. Between 2007 and 2015, around US$230 billion, including US$2.9 billion associated with Azerbaijan’s ruling elite, of illegal money was laundered through the branch.
In September 2018, the internal investigation of Danske Bank found that its Estonian branch was “misused for suspicious transactions” and that the Bank “reacted too late and too slowly.” These findings prompted its CEO’s resignation.
Last year, Estonian and Danish prosecutors launched criminal investigations. In November, Danske Bank was preliminarily charged with breaking Denmark’s anti-money laundering laws. Investigations in Estonia have so far resulted into arrests of branch's ten employees.
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