Deutsche Bank warned Danske Bank that it would only be comfortable dealing with one in 10 of a sample of customers at a branch that has emerged as the centre of one of Europe's largest money-laundering scandals.
Germany’s largest bank broke off its relationship as a correspondent bank for US dollars with Danske in Estonia in September 2015 because of concerns over non-resident customers - who came predominantly from Russia and other former Soviet states – in the branch, according to sources and a report by the Danish regulator.
A senior Deutsche employee made the comments as the relationship was terminated, also warning Danske against Moldovan customers and clients transferring money to Moldova.
Regulators
The Danish financial regulators said in a report in May – which mentioned the events but did not identify the bank as Deutsche – that it had not received any “material showing that Danske Bank investigated those of its customers that had relations to Moldova on the basis of this”.
Deutsche and Danske declined to comment.
The revelations are only the latest in a long-running money-laundering scandal that has shaken Danske Bank and led to investors worrying about the prospects for fines of Denmark’s largest lender.
Danske’s chief executive rejected calls to scale back the non-resident business in Estonia in 2013 despite concerns raised by other senior managers and JPMorgan, according to minutes of an internal meeting seen by the Financial Times.
A report by Promontory, a financial consultancy working for Danske, established that about $30 billion ($25.6 billion) in non-resident money flowed through the bank’s Estonian branch in 2013 alone, according to figures seen by the FT, although not all of that was suspicious. That compares with total deposits in Estonia in 2013 of about $19 billion. The money-laundering scandal lasted from 2007 until 2015.
The Danish regulator wrote in a report in May about several warnings Danske had received before it ordered its own investigation in 2017. It said that one correspondent bank – now known to be Deutsche – terminated its relationship with the Estonian branch in September 2015.
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“In that connection, a senior employee from the correspondent bank in question assessed that out of 10 non-resident customers from the Estonian branch, the correspondent bank would be comfortable only with servicing one given the customers’ characteristics,” the report said.
Deutsche had previously rejected individual transactions from Danske’s Estonian branch, people familiar with the matter added. In 2017, it withdrew from most US dollar clearing in the entire Baltic region.
Deutsche itself paid $630million to settle US and UK investigations into alleged mirror trades used to launder $10 billionn out of Russia between 2011 and 2015.
JPMorgan was the first correspondent bank for US dollars to terminate its relationship with Danske in Estonia in 2013, with the Danish regulator report - also without identifying the bank by name - saying it was because of concerns about non-resident customers. JPMorgan declined to comment.
Danske is gearing up to release its own conclusions from year-long internal investigations into the money-laundering scandal on Wednesday.
– Copyright The Financial Times Limited 2018
