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Fred Dunkley

Fred Dunkley

Writer, Safehaven.com

Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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Another European Bank Falls To Russia-Linked Money Laundering

Corruption

The CEO of Danske Bank has resigned over hundreds of billions in money from Russia and former Soviet states allegedly laundered through its small branch in Estonia.

It’s a sum that is likely to draw significant attention from Washington amid calls for new sanctions on Russia, which could threaten to cut the bank out of the global financial system.

Nor would it be the first time: When the U.S. accused a Latvia bank earlier this year of covering up money laundering, the bank was denied U.S. dollar funding for transactions and it collapsed shortly afterward. For Danske, the situation is slightly different because it does not have a U.S. banking license, but still, it is a correspondent bank and we might be seeing its final days in the global financial network.

Only the specter of U.S. involvement over the past six months leading up to Wednesday had shaved one-third off the bank’s value as investors cut and run.

Now that the results of the investigation have been revealed, the bank’s shares are in free fall:

(Click to enlarge)

As for the CEO, he hasn’t been directly implicated.

“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,” Reuters quoted Borgen as telling a press conference.

Borgen will remain in his position until a new CEO is appointed. Related: Hacks, Bugs And Exploits: Growing Pains For The $4 Billion Blockchain

But Europe definitely has a Russian money-laundering problem that it can’t get out in front of.

According to a recent case study by Allan & Associates, the European Central Bank has been grappling with this for the past decade—to little success.

“The influence of the Russian-linked criminal funds in peripheral EU states is now exposing the ECB’s limitations in this regard,” the report said.

The Latvian case stands out as an embarrassing reminder of this state of affairs—and it went beyond Russia and into North Korea.

In February, the ECB ordered the closure of ABLV, the third-largest bank in Latvia. But it wasn’t due to ECB efforts—it was the U.S. Treasury Department stepped up the heat on this, leaving the ECB no choice but to close the bank down over money laundering, including violations of international sanctions on North Korea.

According to Allan & Associates, even the Latvian authorities had fined two banks prior to this for violating sanctions, but the ECB dialed to step in, pushing the responsibility fully on its member states. More to the point, the ECB said it didn’t have “the investigative powers to uncover such deficiencies”.

Related: Is A Market Meltdown Looming?

Nor is it just Latvia and now Estonia. Last year, the FBI was investigating a Cypriot bank for money laundering on behalf of wealthy Russians. The bank is now shut down. Malta is also constantly under scrutiny for lack of transparency.

And the most famous case was that of Russian auditor Sergei Magnitsky who was arrested in Russia on dubious tax evasion charges in 2008 while investigating state-sanctioned money-laundering through Cyprus and Latvia. He then died in prison. This incident prompted the U.S. Congress in 2012 to sign the Magnitsky Act, which is used to block targeted Russian government officials and businessmen from entering the U.S., freeze their U.S. assets and ban their use of the U.S. banking system.

This Act itself is the most telling witness to the European Central Bank’s impotence when it comes to money-laundering and cross-border crime.

By Fred Dunkley for Safehaven.com

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