Danske CEO resigns in $234B laundering scandal — the largest in European history

After investigators found that Danske allowed $234B of money to be laundered through its Estonian branch over 9 years, its CEO has resigned.


September 20, 2018

CEO of Danske Bank Thomas Borgen resigned after investigators discovered the bank processed $234B worth of illegal payments in the largest money laundering scandal in European history.

Borgen maintains he knew nothing about the post-Soviet-era crimes, but shares in Denmark’s largest bank plummeted as international regulators determine a punishment.

The best place to weather a debt crisis is the laundromat

From 2007 to 2015, Danske’s tiny Estonian branch processed $234B in payments (26x the Estonian government’s annual budget), mostly from non-Estonian accounts.

About 250 of these foreign accounts belonged to ex-Soviet states laundering illicit funds. While Danske agents should have audited these accounts, 42 allegedly colluded with launderers. 

As neighboring banks limped through Europe’s debt crisis with returns ranging from 6% to 70%, Danske’s Estonian branch delivered returns of 402%. Over 9 years of laundering, Estonian funds accounted for up to 10% of the Danske’s pre-tax profits. 

But karma is good at sniffing out dirty laundry…

After Borgen took the reins at Danske in 2013, shares at the bank doubled. But since the scandal, Danske stock has fallen 50% from its high, falling 8% yesterday alone.

Whether or not he was involved, Borgen covered Danske’s butt: Danske ignored whistleblower warnings in 2007 and 2010, and after authorities put Danske’s dirty drawers on display, he waited 3 years to launch an investigation.

Danske has pledged $274m to a foundation to fight international financial crime, and Denmark plans to tighten laundering laws as the investigation continues (only 6.2k of 15k Estonian accounts have been audited). 

But the damage to Danske — and Denmark — isn’t done

In addition to its stock losses, Danske has now lowered profit forecasts from $3.12B to $2.67B. But the penalties could be worst: Analysts estimate fines could range from $6B to $8.3B.

Worst of all, since both the US and Estonia plan to launch criminal investigations, analysts expect reduced investment in the Danish economy. Denmark’s economy is roughly the same size as the sum of money laundered through Danske — or at least it used to be.

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