From ZeroHedge:
Roughly six months after Latvia's third-largest lender, ABLV, was thrust into insolvency following shocking allegations of bribery and money laundering, a similar story is playing out in neighboring Estonia, where the local branch of Danske Banke on Friday revealed that a suspected money laundering scheme is much more serious than investigators had previously realized.
Call it the local Wells Fargo: while initial reports that billions of dollars of illicit funds from shadowy sources in the former Soviet Union had flowed through the branch were largely ignored by the markets, the Wall Street Journal sent shares of Danske bank spiraling lower when it reported that as much as $150 billion was laundered through the bank between 2007 and 2015 - a staggering amount that dwarfs the size of the entire Estonian banking industry. Initial reports from earlier in the year had the suspected illicit funds at $8 billion.
Danske's loss, along with discouraging reports involving ING (where an internal warning reportedly said its license to operate could be threatened) and the imminent departure of Deutsche Bank's top shareholder, drove European banks to their lowest level since November 2016.
While Danske is facing investigations by Danish and Estonian authorities, larger European regulators like the FCA have so far declined to get involved, which is perhaps fortunate for the bank's shareholders. However, the staggering size of the fraud virtually guarantees future action as regulators look to plug what appears to be a gaping hole in the European financial system's regulatory purview.
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.What's worse, Danske's leaders resisted doing anything about the suspicious activity until they were forced to when a correspondent bank suddenly refused to do business with their Estonian branch....MORE
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.
