February 19, 2019
By Huw Jones and Tarmo Virki
LONDON/TALLIN (Reuters) – Danish and Estonian regulators are being investigated by the European Union’s banking watchdog over a possible breach of EU law relating to alleged money-laundering at Danske Bank.
Some 200 billion euros ($226 billion) of suspicious payments from Russia and other states flowed through the Estonian branch of Danske Bank, which is already being investigated in Denmark, Estonia, Britain and the United States, between 2007 and 2015.
This has raised questions about supervision of the Danish bank, prompting the EU’s executive European Commission to ask the European Banking Authority (EBA) last September to investigate a possible breach of EU law by Estonia’s Financial Services Authority and the Danish Financial Services Authority.
EBA Interim Chair Jo Swyngedouw said in a letter dated Feb. 18 that following a preliminary inquiry the watchdog had decided to open a formal investigation into the Estonian Financial Services Authority, which is known as Finantsinspektsioon, and the Danish Financial Services Authority.
Meanwhile, Estonia’s financial supervisory authority said it has ordered Danske Bank to close its Estonian operation within a period of eight months.
It said in a statement that Danske Bank had broken money laundering rules “for years”, adding that the maximum penalty if the Danish bank did not comply with the closure order was 10 percent of group turnover.
Danske Bank, which was not immediately available for comment, has said it has started to close down its Estonian business after realizing the extent of alleged money laundering.
The EBA’s investigation into the regulators will take two months, and if it finds a breach of EU law, it can make recommendations to them to address failings.
Last year, the EBA made recommendations to the Maltese Financial Intelligence Analysis Unit after establishing a breach of EU law in relation to its supervision of anti-money laundering requirements at Pilatus Bank.
(Reporting by Huw Jones in London and Tarmo Virki in Tallinn; Editing by Rachel Armstrong and Alexander Smith)