Danske Bank shares slumped to a four-year low Wednesday after the Danish lender said its CEO would resign following a probe into money laundering at one of its branches in Estonia. Danske Bank A/S (DNKEY) shares slumped to a four-year low Wednesday after the Danish lender said its CEO would resign following a probe into money laundering at one of its branches in Estonia. The bank said the investigation found that the "vast majority" of around $234 billion in examined client flows from the Baltic branch, which were mainly connected to clients in Russia and the former Soviet Union, were deemed suspicious. It also said that even though CEO Thomas Borgen and chairman Ole Andersen did not beach their legal obligations, Borgen nonetheless decided to step down. "It is clear that Danske Bank has failed to live up to its responsibility in case of possible money laundering in Estonia," said Borgen, who oversaw the operation from 2009 to 2012. "I deeply regret this." Danske Bank shares were marked 7.4% lower by mid-day in Copenhagen and changing hands at Dkr161.95 each, a move that extends the stock's year-to-date decline past 33% and takes it to the lowest level since late 2014. Danske Bank acquired the Estonian branch in 2007, when it purchased assets from Finland's Sampo Bank. Seven years later, following a warning from an internal whistleblower, Danske said it "became clear that (anti-money laundering) procedures at the Estonian branch had been manifestly insufficient and inadequate." Last year, the bank acknowledged that "major deficiencies in controls and governance that made it possible to use Danske Bank's branch in Estonia for criminal activities such as money laundering." Dankse is the latest in a string of European lenders implicated in money laundering allegations, with ING Groep NV (ING) - Get Report of the Netherlands agreeing only last week to pay a €775 million ($900 million) fine after it admitted that "shortcomings ... resulted in clients having been able to use their bank accounts for money laundering practices for years." The European Union is looking at ways it which is can crack down on the practice, including setting up a region-wide authority similar to the European Central Bank's remit to monitor financial stability risks, but the proposals aren't expected to gain traction until after next spring's European parliamentary elections. In the meantime, Danske Bank could face further action from U.S. regulators, who may forbid both domestic banks, and international lenders with licences to operate in the United States, from dealing with the Danish firm, a move that would lock it out of U.S. dollar funding markets and cripple its ability to operate outside of its home market. The Wall Street Journal has reported that U.S. Justice Department, as well as the Treasury and the Securities and Exchange Commission, are looking into dollar denominated transactions at the bank amid allegations that it knew some were connected to blacklisted Russian clients as early as 2013.<doc-sep>Borgen joined Danske Bank in 2009, overseeing international operations until 2013, when he was made CEO Thomas Borgen, CEO of Denmark’s largest bank, resigned on September 19 in the midst of allegations of money laundering within Danske Bank’s Estonian operations. Danske Bank is currently under investigation following accusations that an Estonian branch was used to launder over €200bn of illegal funds, which have been traced back to a number of ex-Soviet states. In May this year, the Danish regulator identified that there had been “serious shortcomings” in the bank’s anti-money laundering precautions. Following calls from the regulator, Danske Bank commissioned a full internal inquiry into activities at the Estonian branch. In May this year, the Danish regulator identified that there had been “serious shortcomings” in the bank’s anti-money laundering precautions The report produced by the investigation indicates that there were a series of failings on the bank’s part to take money laundering in hand. In 2007, the Estonian regulator identified that “criminal activity in its pure form, including money laundering”, was taking place in the bank’s Estonian operations. In 2014, a whistleblower raised similar concerns about operations at the Estonian branch. Although the bank introduced measures to exert further control over Estonian operations later the same year, the report concluded that it had not gone far enough. The suspicious transactions identified by the report came from a portfolio of non-resident customers from Russia, Azerbaijan, Ukraine and other ex-Soviet states, and were responsible for a flow of up to $150bn (€128bn) of illegal money between 2007 and 2015. Borgen took pre-emptive action and stepped down from his post before the full findings of the report had been divulged. He said in a statement: “Even though the investigation conducted by the external law firm concludes that I have lived up to my legal obligations, I believe it is best for all parties that I resign.” Borgen also apologised on behalf of Danske Bank for failing to take action against unlawful transactions. Between 2009 and 2012, the CEO was in charge of all international operations at Danske Bank, including the Estonian business. The scandal is the latest in a series of failures within EU countries to get a handle on money laundering. Earlier this month, Dutch bank ING admitted it had failed to recognise and combat money laundering. It will pay €775m in fines and settlement fees. The Danish authorities are currently in talks to tighten money laundering regulations and are considering upping fines by 700 percent. This will give them significantly more scope to penalise banks for failing to investigate suspicious transactions. The EU is woefully lacking in regulatory procedures with regards to money laundering, and the European Central Bank does not currently have the authority to investigate such cases. The full findings of the report could have significant implications, paving the way for stronger money laundering regulation in Europe. Given that September alone saw multibillion-dollar scandals in two EU countries, it is clear that tighter controls are needed.<doc-sep>COPENHAGEN (Reuters) - Danske Bank's DANSKE.CO chief executive Thomas Borgen resigned on Wednesday after an investigation revealed payments totaling 200 billion euros ($234 billion) through its small Estonian branch, many of which the bank said were suspicious. The Danish bank detailed compliance and control failings amid growing calls for a European Union crackdown on financial crime after a series of money laundering scandals which have attracted the attention of U.S. authorities. “Even though I was personally cleared from a legal point of view, I hold the ultimate responsibility. There is no doubt that we as an organization have failed in this situation and did not live up to expectations,” Borgen, who will stay on until a new CEO is appointed, told a press conference. Borgen, 54, was in charge of Danske Bank’s international operations, including Estonia, between 2009 and 2012. While the report shed some light on the bank’s activities in Estonia, investors are concerned whether the United States, which has placed sanctions on Russia, will punish it. “As this is the largest money laundering scandal in European history, and Danske Bank is a major bank that sends dollars around the world, I imagine that this will certainly get the attention of the U.S. authorities,” Bill Browder, the founder and CEO of Hermitage Capital Management who has campaigned against corruption in Russia, told Reuters. Danish politicians were critical of Danske Bank for not revealing exactly how much money was allegedly laundered and not saying who was legally responsible for the lapses. “It is deeply embarrassing that for so many years there have been transactions that should not have taken place. Much of it is expected to be money laundering, and that is simply not good enough by Danske Bank,” business minister Rasmus Jarlov, who oversees Denmark’s banking sector, told a press conference. Danske Bank said in its summary of a report covering around 15,000 customers and 9.5 million payments between 2007 and 2015 that Borgen, Chairman Ole Andersen and the board “did not breach their legal obligations”. Slideshow ( 7 images ) Andersen said the bank had made an assessment of whether it violated U.S. laws but declined to share its conclusion when asked at a press conference. The Estonian non-resident portfolio’s around 10,000 customers were registered in 90 different countries, with Russia, Britain, the British Virgin Islands and Finland the main ones, Danske Bank said, adding that around a third of them became clients of the branch in 2007. Danske Bank, whose already battered shares fell by nearly 8 percent, said some 6,200 customers had been examined and it expected “a significant part of the payments to be suspicious”. Shares in Danske Bank had doubled in value from when Borgen took over in 2013 to July 2017, but have since lost more than a third as allegations of suspicious transactions increased and Denmark and Estonia began criminal investigations. The bank said it had taken action including “warnings, dismissals, loss of bonus payments and reporting to the authorities” against current and former staff, as well as overhauling systems found to have failed. In an indication of the costs such lapses can have, Dutch bank ING INGA.AS agreed to pay 775 million euros ($900 million) this month after admitting criminals had been able to launder money through its accounts. And earlier this year U.S. authorities accused Latvia’s ABLV of covering up money laundering, leading to the bank being denied U.S. dollar funding and its swift collapse. While Danske does not have a banking license in the United States, banning U.S. correspondent banks from dealing with it would amount to shutting it out of the global financial network. Slideshow ( 7 images ) GRAPHIC: Danske Bank share price performance - reut.rs/2plB6Om SERIOUS SHORTCOMINGS The report found that Danske Bank failed to take proper action in 2007 when it was criticized by the Estonian regulator and received information from its Danish counterpart that pointed to “criminal activity in its pure form, including money laundering” estimated at “billions of rubles monthly”. And when a whistleblower raised problems at the Estonian branch in early 2014 the allegations were not properly investigated and were not shared with the board, Danske said, adding that measures to get its business there under control had been insufficient. Danske Bank also said the Estonian branch did not employ its anti-money laundering procedures because it had not migrated its Baltic banking activities onto the bank’s IT platform as this would have been too expensive. “The report describes serious shortcomings in the organization of Danske Bank, where risk-appetite and risk control were not in balance,” the head of Estonia’s FSA financial regulator Kilvar Kessler said in a statement. Danske Bank, which cut its forecast for annual net profit to 16-17 billion Danish crowns, from a previous 18-20 billion, has successfully overcome previous traumas. The government had to step in when international markets froze in 2008 and in 2012 it was criticized for an advertising campaign that sought to improve its image, borrowing symbols linked to anti-establishment movement Occupy Wall Street. Prior to the money laundering scandal, Borgen had managed to improve the bank's image and earnings in part by cutting costs, shifting its focus to wealthier clients and expanding in Sweden and Norway to rival the Nordic region's biggest bank, Nordea NDA.ST.<doc-sep>The chief executive of Denmark’s biggest bank is resigning amid allegations that its Estonian affiliate was at the center of a major money-laundering scandal. "It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia," Chief Executive Thomas Borgen said in a September 19 statement, as he announced his resignation. Separately, an internal report into allegations that billions of euros in laundered money from Russia and other former Soviet states flowed through the bank’s branch in Tallinn said that "the vast majority" of transactions between 2007 and 2015 were found to be “suspicious." The Copenhagen-based bank said it was unable to provide "an accurate estimate of the amount of suspicious transactions made by nonresident customers in Estonia," but it estimated the total flows in the Estonian unit at about 200 billion euros ($234 billion), nine times Estonia’s 2017 gross domestic product. These flows covered about 15,000 accounts, of which Danske Bank said roughly 6,200 have the “highest risk indicators.” “Almost all of these customers have been reported to the authorities,” it said. Danske Bank is already the target of criminal investigations in Denmark and Estonia. U.S. law enforcement agencies were also looking into the case, according to reports. Earlier this year, U.S. authorities accused the Latvian bank ABLV of covering up money laundering, leading to the bank's collapse, after it was denied U.S. dollar funding. Based on reporting by AP, AFP, Bloomberg, dpa, Reuters, and The Wall Street Journal<doc-sep>
Danske Bank chief executive Thomas Borgen has quit following an investigation into payments totalling some 200 billion euros ($302 billion) through its Estonian branch, with the Danish bank saying many of them were suspicious. "It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia. I deeply regret this," Borgen said in a statement, which detailed failings in compliance, communication and controls. Danske Bank commissioned the probe last year after reports of dirty money flowing through its Baltic subsidiary, including from family members of Russian President Vladimir Putin. Regulators and the financial community will scrutinize the Danske Bank report, which follows calls by Brussels for a new European Union watchdog to crack down on financial crime following a series of major money-laundering scandals. Danske Bank said its investigation had concluded that Borgen, chairman Ole Andersen and the board of directors "did not breach their legal obligations toward Danske Bank," adding it had taken action against some staff. "We have taken a number of measures against current and former employees ... in the form, among other things, of warnings, dismissals, loss of bonus payments and reporting to the authorities," the bank added. Danske Bank's report, which covered around 15,000 customers and 9.5 million payments from 2007 to 2015, said some 6,200 customers had been examined. "Overall, we expect a significant part of the payments to be suspicious," Danske said in a statement. Concern over U.S. sanctions Dutch bank ING this month admitted criminals had been able to launder money through its accounts and agreed to pay 775 million euros ($1.1 billion) to settle the case. A third of Danske Bank's stock market value has been wiped out in the last six months, driven by concerns over a possible inquiry by U.S. authorities and the penalties this could entail. "Crucially, Danske say there have been 'no findings of sanctions violations, which is a relief given concerns of an investigation by the U.S. Office of Foreign Assets Control," analysts at brokerage Jefferies said in a note. Estonia's Baltic neighbour Latvia has been in the centre of various banking scandals, including money laundering, for years after it became a hub for international banking, mainly from neighbouring Russia and eastern European states like Ukraine. The issue caught the eye of U.S. authorities in particular, who have been worried that dirty money flows can help evade sanctions or finance terrorism. U.S. authorities earlier this year accused Latvia's ABLV of covering up money laundering and the bank was promptly denied U.S. dollar funding, leading to its collapse. Both Estonia and Latvia are members of the European Union and NATO as well as the eurozone. Whistleblower ignored While Danske does not have a banking licence in the United States, banning U.S. correspondent banks from dealing with it would amount to shutting it out of the global financial network. Danske said it was not able to provide an accurate estimate of the suspicious transactions through its Estonian branch, but said the non-resident portfolio included customers from Russia, Azerbeijan, Ukraine and other ex-Soviet states. The report found that the bank failed to take proper action in 2007 when it was criticized by the Estonian regulator and received information from its Danish counterpart that pointed to "criminal activity in its pure form, including money laundering" estimated at "billions of roubles monthly." When a whistleblower raised problems at the Estonian branch in early 2014, the allegations were not properly investigated and weren't shared with the board, Danske said. And while it took measures to get its Estonian business under control in 2014, these were insufficient. Danske Bank also said it had decided not to migrate its Baltic banking activities onto its IT platform, because it would have been too expensive. As a result the Estonian branch did not employ Danske's anti-money laundering procedures. The bank, with its shares falling by eight per cent following the release of the report, also lowered its expectations for annual net profit to 16 billion to 17 billion Danish crowns, from a previous range of 18 billion to 20 billion. With files from The Associated Press