$150 billion money-laundering scheme investigation implicates Citigroup and Deutsche Bank

By Ravindra Chagetha

U.S. law enforcement agencies including Security and Exchange Commission (SEC), the U.S. Justice Department, and Treasury Department have started money laundering investigations for Denmark’s largest bank, Danske Bank. Citigroup and Deutsche Bank have also been implicated in the money laundering investigation.

The U.S. law enforcement agencies came into action after a confidential whistleblower filed a complaint against Danske Bank, though the complaint was filed over two years ago. The CEO of Danske Bank, Thomas Borgen, has even ignored the warnings of suspicious transactions. In a meeting, in October 2013, Thomas Borgen was informed about the level of activities in the Estonian branch of the Danske Bank. Most of these activities are from ex-Soviet states and Russia. In the meeting, the bank was informed that these activities are higher than that of the rivalry banks and need to be reduced significantly. Thomas wanted to discuss the issue outside the forum. Estonian officials are investigating 26 former Danske employees including low-level staff to former branch CEO. These employees are accused of helping launder $230 million from a fraud committed in Russia.

It is a massive money laundering case where an estimated $150 billion is suspected of having flown through non-Estonian customer accounts at Estonian branch of Danske Bank from 2007 to 2015, from countries including Russia, Moldova, and Azerbaijan. The bank is also conducting its own internal investigation and will reveal the results on 19th September. Estonian and Danish authorities have already investigated the bank and shared the information with their U.S. counterparts.

The whistle-blower complaint has also named Deutsche Bank AG and Citigroup Inc. as involved in the transaction of Estonian Branch of Danske Bank. Deutsche Bank acted as a correspondent bank for Danske Bank in handling dollar wire transfer while the Moscow office of Citigroup was involved in some transfers through Estonian Branch of Danske Bank.

Treasury and Justice Departments of the U.S. can fine the banks and the U.S. Treasury Department can also restrict the supply of U.S. dollar to foreign banks. The major risk for Danske bank is potential U.S. fine because Danske has used dollar funding and transactions. The shareholders of the Danske bank are also nervous because of the on-going money-laundering probe. The share price of Danske Bank has faced a sharp decline in 2018 which is a sign of selling pressure.