Danske Bank to Exit Russia Amid Money Laundering Scandal
Danske Bank has outlined plans to quit Russia by January
next year after the Danish bank was rocked by allegations its Estonian branch
was involved in a mind-boggling $230 billion money laundering scandal, bne
IntelliNews reported Friday.
In a memo to his contacts yesterday, Russia Country Manager
Edvin Kornelius said “goodbye to our Moscow corporate team” as well as part of
the bank’s remaining St Petersburg personnel. Kornelius said the remaining
Moscow-based clients will be supported out of St Petersburg until the lender’s
full closure in January next year.
“Preparations for voluntarily and orderly closure goes on
time with about 100 corporate customer groups remaining out of 325 six months
ago,” said Kornelius, who has been in charge of the Russia operation since
2006.
The lender plans to continue the winding-up process without
deal and request the Central Bank of Russia (CBR) to take back their banking
licence in the Autumn.
“Subject to and following the CBR's consent, we plan to
finalize the operation’s closure not later than end of January 2020,” added
Kornelius. “We are thankful to both Danske’s Moscow and St Petersburg teams for
their dedicated and professional work, consistency and persistent customer
focus and support under stressful circumstances demanding to off-board valuable
Group customers in Russia under time pressure!"
If confirmed then Danske would be the latest in a growing
list of foreign owned banks exiting Russia. Danske has already closed its
beleaguered Estonian business. That business was accused of laundering money
for Ukrainian arms traders in North Korea and Iran amongst other things.
Danske had about 75 employees in Russia, primarily operating
out of Saint Petersburg and with a small representational office in Moscow. The
majority of its customers are Nordic corporates and businesses, along with a
few international corporates with a solid Nordic footprint.
Registered by the CBR in November 1996, Danske has been a
rather inconspicuous pillar of the Russian banking system until very recently.
From 1996 until 2005 the bank’s name was ZAO “First Shipping Bank” and it was
located in Arkhangelsk.
By the beginning of 2006, the lender changed its name to ZAO
“Profibank” and was moved to St Petersburg. In August 2006, Finland’s Sampo
Bank became the main shareholder until Danske acquired the operation a year
later and changed the name to its current form.
Danske began to emerge from the shadows of its bigger
European counterparts in 2014 when whistleblower Howard Wilkinson provided
evidence in 2014 that the Danish lender connived with customers to launder
money.
Wilkinson, who had been head of Danske Bank’s trading unit
in the Baltics from 2007 to 2014, sensationally revealed how the Estonian
branch was used to launder billions of dollars stemming from Russia, Ukraine,
Moldova, and other post-Soviet states, with the participation of Deutsche Bank
as well as Finnish, Swedish, Norwegian, and Latvian lenders.
The money was allegedly channelled from front companies —
mainly English and Scottish Limited liability partnerships — that were used by
the Russian intelligence services, relatives of Russian President Vladimir
Putin, the former Ukrainian President Viktor Yanukovych and many wealthy
oligarchs in the post-Soviet space.
Wilkinson’s US lawyer, Stephen Kohn, wrote to the Danish
prosecutor in July, demanding a criminal investigation into allegations that
Danske took retaliatory steps, attempting to infringe upon Wilkinson’s private
life.
Danske Bank has said it is impossible to say how much of the
gigantic sum was dirty money, but confessed that many of the suspicious
transactions could be "criminal".
Of the around 15,000 accounts under investigation — which
Danske Bank closed in 2015 — 6,200 are considered suspicious and most of them
have been brought to the attention of the authorities.
The bank has been unable to specify exactly where the money
came from but admitted that 23% of the incoming funds were from Russia.
Danske’s shares have shed half of their value since the
start of 2018 as the scandal has reverberated throughout the Nordics and the
Baltics.
The money laundering allegations are linked to a fraud case
exposed by the Russian lawyer Sergei Magnitsky, who was jailed in Russia after
he revealed the involvement of several high-ranking Russian officials in
stealing massive tax payments from several companies, including the investment
fund Hermitage Capital.
Magnitsky died in 2009 aged 37 after being held in a Russian
jail for a year, where he was denied medical care.
Bill Browder, founder of Hermitage Capital who employed
Magnitsky, told bne Intellinews in April that there has been $1 trillion
capital flight from Russia over 20 years and “most of that money is of dubious
origin,” according to Browder.
His investigations into the $230 million Hermitage tax fraud
has pinpointed how banks with units in the Baltics, such as Danske, Swedbank
and Nordea, helped to launder the proceeds of the same tax fraud.
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