Deutsche Bank, Germany’s top lender, handled about €130bn of the “suspicious” money in the Danske Bank affair – the biggest money-laundering scandal in EU history.
“Deutsche Bank acted as correspondent bank for Danske Bank in Estonia. Our role was to process payments for Danske Bank. We terminated this relationship in 2015 after identifying suspicious activity by its clients,” the German lender told press on Tuesday (20 November).
A “correspondent bank” acts as an intermediary for other banks in countries where they do little business.
In this case, that meant Deutsche Bank helped Danske Bank’s clients in Estonia to move money into the US financial system.
Those clients were intimates of Russian president Vladimir Putin, Russian intelligence services, Russian mobsters, and members of the Azerbaijani elite, according to findings in Denmark.
Hundreds of millions of the funds were also ‘blood money’ linked to the murder of Russian anti-corruption activist Sergei Magnitsky, Magnitsky’s former employer, Bill Browder, has said.
The Deutsche Bank revelation comes after a Danske Bank whistleblower, Howard Wilkinson, testified to Danish MPs on Monday.
“I would estimate that $150bn [€130bn] has flowed through this particular bank”, Wilkinson said.
He named the bank only as a “US subsidiary of a European bank” and a “major correspondence bank handing US dollar transactions” because a Danske Bank gag order forbade him from saying more.
He said two US banks were also involved, with the Reuters news agency, citing sources, saying that these were JP Morgan and Bank of America.
“Nobody really knows where this money went, all we know is that the last people who saw it were people from those three banks in the US. They were the last control, and when it went awry was the money in the global financial system,” Wilkinson said.
“There’s no chance in the world that any of the suspicious money … will ever be traced or that any of those criminals will ever lose a single cent of it,” he added, given that it has already taken years for the scandal to come out.
Showdown in parliament
The fresh revelations set the scene for Wilkinson’s second testimony, due in the European Parliament on Wednesday.
The acting CEO of Danske Bank, Jesper Nielsen, will also take part, with MEPs, such as Danish centre-left deputy Jeppe Kofod, set to urge him to tear up the non-disclosure agreement that his bank forced Wilkinson to sign under threats of financial penalties.
The German and US banks all terminated their business with Danske Bank between 2013 and 2015, but the dodgy funds had flowed through their accounts for more than five years before they washed their hands.
The news saw Deutsche Bank’s shares fall a further three percent on Tuesday amid concern that German and US regulators might impose fines.
Deutsche Bank already paid €550m in fines to British and US regulators in 2017 for having funnelling about €9bn of illicit Russian money.
The scandal, which was itself the biggest in EU history before the Danish affair, saw Bafin, the German regulator, install a “special representative” in Deutsche Bank to oversee anti-money laundering compliance in an unprecedented step.
The US Department of Justice is still investigating the €9bn case in a process that could see the German lender pay out further penalties.
The Danish affair has prompted the European Commission to table new anti-money laundering laws to help clean up the European banking system.
More to come?
But if Danske Bank lifts its gag order on Wilkinson it could lead to further revelations of how small EU countries with large offshore banking sectors act as a conduit for dirty money into the EU and US financial system.
Its Estonian branch aside, there was a “deafening silence” on what Danske Bank’s Lithuanian branch has been doing, Wilkinson said on Monday.
Cyprus, Malta, and Latvia are also weak links in the EU’s anti-money laundering chain, Panicos Demetriades, Cyprus’ former central bank chief, previously told EUobserver.
The “political pressure” on bank supervisors in these countries was “so great that it’s very hard for them to do the right thing,” he said.
Banks in Cyprus handled €3.4 trillion of cross-border transactions including by non-resident or offshore clients between 2008 and 2015, according to European Central Bank (ECB) data obtained by the Bloomberg news agency in October.
Latvian banks handled €2.8 trillion and Estonian ones €900bn, the ECB said, indicating that the Dankse Bank and Deutsche Bank scandals could be just the tip of the iceberg.