Russian To Judgment, Con't

Earlier this week I talked about Denmark's Danske Bank, facing a massive scandal involving Russian money laundering through its tiny Estonian branch.  It turns out however that the $30 billion in rotten rubles was really more like $150 billion or more, as the scandal has exploded into a full-blown international incident.

Investigators at Denmark’s largest bank are studying around $150 billion of transactions that flowed through its Estonian outpost between 2007 and 2015 as part of an internal money-laundering probe, according to people familiar with the matter.

Much of that figure, which dwarfs Estonia’s total deposits, came from companies with ties to Russia and the former Soviet Union.

Danske Bank A/S has been criticized by its regulator for lax oversight of illicit money flows. The bank’s investigators haven’t determined if all $150 billion handled by non-Estonian entities should be deemed suspicious. But such a large flow of money suggests that roughly $8 billion of suspected money-laundering transactions previously reported by a Danish newspaper could grow higher.

Shares in the bank traded down more than 7% on Friday after The Wall Street Journal reported on the scope of the investigation.

The $150 billion figure, which has been presented to the bank’s board of directors, is a substantial sum considering Estonia’s entire banking system reports total deposits of €17 billion ($19 billion). Even in the context of Russia, the suspected source of some of the funds, the figure would represent more than a year’s worth of the country’s corporate profits. The flows would have stayed in the branch for only a short time before leaving Estonia, according to a person familiar with the investigation, so wouldn’t fully show up in official statistics.

“Any conclusions should be drawn on the basis of verified facts and not fragmented pieces of information taken out of context,” Danske Bank Chairman Ole Andersen said in a statement. “As we have previously communicated, it is clear that the issues related to the portfolio were bigger than we had previously anticipated.” The bank says the results of its probe are being finalized.

Danske’s Estonian branch is the subject of criminal investigations in Denmark and Estonia, prosecutors in the countries said. The Danish Financial Supervisory Authority reprimanded the bank for weak controls in May and ordered Danske to hold about $800 million more in capital, but didn’t issue a fine.

The problems at Danske highlight the growing concern among authorities about how illicit money flows—especially from Russia—are channeled through European-regulated banks to the West.

Shell companies, including many registered in the U.K., controlled most of the accounts in question, and many of the accounts had links to people in Russia and former Soviet Union countries, people familiar with the matter said. The U.K.’s Financial Conduct Authority isn’t probing the bank, according to a person familiar with the matter.

I bet that's going to change.  And again, I bet Robert Mueller is taking a long, hard look at that 2007-2015 period too, especially the last three years.

Don't be surprised if some familiar names come up in this investigation.