A couple of days ago the always good Francis Coppola wrote a piece for Forbes entitled,
The Banks That Helped Danske Bank Estonia Launder Russian Money
In it she made the simple but essential point that while Danske Bank, through its Estonian branch, had laundered $234 billion,
…Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve’s electronic settlement system. Big banks, in other words.
Coppola then named the banks involved.
J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia. (bold emphasis added by me)
So, Bank of America, Deutsche Bank and J.P. Morgan moved money OUT of Danske and in to dollar denominated accounts elsewhere, (see section 19 of Danske’s internal investigation). but that is only half the story. It leaves the huge unanswered question,
who moved the money in to Danske Bank’s Estonian branch in the first place?
The accounts through which the money was laundered are non-resident accounts. Non-resident simply means the people or entities which hold the accounts do not live in Estonia. So how did these non residents deposit their money in Danske’s Estonia branch? Either they physically transported $234 billion dollar’s worth of their local currencies in trunks and suitcases from their own country, in to Estonia and to the bank, or it had to have been deposited electronically. Which would mean some other banks, in addition to those mentioned by Forbes, were involved.
So are there more banks than just the four listed in the Forbes article who had and perhaps still have relationships with Danske bank and who therefore could have (I’m not accusing anyone), wittingly or unwittingly moved the money into Danske’s Estonian branch?
Ah, the joys of the internet. Here is the list of Danske Bank ‘s Correspondent banks as of today. (A note for all the lawyers, I am certainly NOT suggesting any of these banks laundered money. I am merely noting that it isn’t just the four banks mentioned in the Forbes article that routinely helped Danske move money around.)
For those who might not know, a correspondent bank is simply a bank that your bank has a working relationship with. So J.P.Morgan was Danske’s correspondent bank in the US. The relationship is often a bigger more international bank, which is licensed in many countries, providing services to a smaller more regional or local bank. But its important not to see this Correspondent relationship as being all one way. By having a relationship the larger bank not only gets a fee for its help but becomes the international conduit for the money that its owner wishes to move out of the small bank and its country of origin into the wider global market.
The lists of Danske’s correspondent banks shows 16 countries and territories: Australia/New Zealand, Belarus, Canada, Switzerland, The Czech Republic, Europe, Great Britain, Hong Kong, Hungary, Japan, Norway, Poland, Russia, Sweden, Singapore, and the USA . Bear in mind that some of these countries might be where the laundered money was coming from and some might be where that money was hoping to get to.
At the risk of insulting people when I look for the countries where the money might have been coming from I see the Czech Republic, Belarus, Russia and maybe Poland.
In the Czech Republic Danske’s correspondent bank is Obchodni Bank. It is the largest bank in the republic but is actually majority owned by KBC Bank, part of KBC Banking and Insurance Group which is one of Europe’s largest financial houses and it’s Belgian. So perhaps the Belgian authorities should be concerned?
In Belarus the Correspondent bank is Priorbank JSC. This is a billion and a half euro bank, with 760 000 customers. It is in fact 87.74% owned by Raiffeisen Bank of Austria. Now Raiffeisen and I have form, so I have to be careful here. The link is to an article about money laundering which I wrote called “How to make the truth illegal’. What I can say is that not only does Raiffeisen’s name come up in the Magnitsky laundering case, it also comes up centrally in the infamous money laundering scandal in which $1.2 billion was looted and laundered from Kyrgyzstan. The best investigation of this affair I know of concluded,
…the suspicious transactions went through many banks around the world, with the largest amounts passing through Citibank in New York, the UK’s Standard Chartered and Austria’s Raiffeisen Zentralbank. These banks continued their relationship,… (My emphasis)
So perhaps the Austrian authorities should take a little look too?
In Poland Danske has its own banking network.
In Russia, where it has been assumed that most of the dirty money came from, Danske’s correspondent bank is Russia’s Central Bank. Although things do get awfully wiggly in Russia I still think the Central Bank is an unlikely accomplice.
Danske does have its own presence in Russia. So it could have taken the dirty money directly into its own Russian subsidiary and moved it to Estonia all by itself. But according to its web site it has only 60 employees in all of Russia so they would have been terribly busy and even they MIGHT have noticed something was odd about $234 billion coming in and going straight back out. I also doubt every crook lined up at the same teller window week after week.
This seems to leave us with the four banks mentioned by Forbes. If so, then all the money that was laundered from Russia would have had to have been transferred into Danske by Deutsche and CITI. The other two banks which the Forbes article mentions, J.P.Morgan and Bank of America, only moved the money out, not in. Now while I think this is entirely possible, given the feats of laundering that both Deutsche and CITI have achieved before, that they could have done it all themselves, it seems naive not to at least look to see if there were other banks involved in Russia. So I did.
And what I found is that there is a second, larger list of correspondent banks. You get to it through the part of Danske’s web site that deals with Transaction Banking. For those of you aware of trends in Money Laundering the mention of ‘Transaction Banking’ might have started a red light flashing. Transaction or Electronic Laundering, uses fake on-line sales and is the fastest growing method of laundering. One recent estimated is that $200 billion a year of transaction laundering occurs in the US alone.
It’s laborious to use but it reveals that several other large European banks have ties to Danske and help it to move money.
It turns out there are other banks in Russia that Danske does business with, namely Alfa Bank and Zao Unicredit Bank.
Alfa is a strange one. On the one hand Global Finance Magazine has repeatedly called it Russia’s Best Bank. On the other it has had a strategic alliance with GazProm. America sees Gazprom as the Dark Lord Putin’s One Ring, binding European countries to its Gas supply. Alfa has also been at the centre of the whole Trump/Russian dossier storm. And as if that wasn’t enough in December 2017, Alfa Bank’s wholly owned Dutch subsidiary, Amsterdam Trade Bank, was raided in connection with an investigation into possible money-laundering.
Zao Unicredit Bank is part of the sprawling trillion euro Italian Bank Unicredit. So this brings Italian Banking in to our story. But it is worth remembering, however, that Zao used to be part of Bank Austria. It was renamed when Unicredit bought Bank Austria. A purchase which, I have been told by one who worked in UniCreidt, pissed off Austrian bankers something rotten.
UniCredit still owns Bank Austria which means an Italian Bank, owns the third largest bank in Austria. So Zao not only brings Italian banking in to the picture but links a second Austrian bank to Danske.
Danske also has partner banks in Serbia. One is Erste Bank AD Novi Sud, which is part of Bank Erste – which is the largest bank in … Austria. Another is RaiffeisenBank Ad Beograd. So now we have all three of Austria’s largest banks tied to Danske. No other country has all three of its biggest banks all tied to Danske. Might we being to wonder if there is something about Austria?
Not to be outdone The Italians are there too. Banc Intesa AD Beograd is one of the largest banks in Serbia but is 93% owned by another huge and ailing Italian bank Intesa Sanpaolo. And UniCredit Bank Serbia works with Danske. But again Unicredit Bank Serbia was part of Bank Austria. So is this an Italian or another Austrian connection?
Ukraine is on the list too. Another country that routinely crops up in Money Laundering and political/banking corruption stories. In Ukraine we have Raiffeisen Bank Aval and UniCredit Bank LLC Kiev. And once again the UniCredit subsidiary used to be Bank of Austria. Hmm.
In Croatia we find among others, RaiffeisenBank Austria and Erste & Steiermärkische Bank. While Societe General makes an appearance for the French.
In Bosnia we again have, one again, Raiffeisen and Unicredit.
While in Kazakhstan we have HSBC flying the flag for British Money Laundering banks. (Not that I’m suggesting AT ALL that HSBC might ever do anything shady in Kazakhstan).
And if we look for Middle East connections there is Banque Saudi Fransi which is Credit Agricole and Saudi British Bank which is 40% HSBC.
All of which amounts to what? There is nothing criminal or even unusual in various banks having relations with Danske. All banks have relations with each other. But is there a pattern? There is a close connection between Dankse and all three of Austria’s largest banks and both of Italy’s largest , in countries that we might not wholly unfairly suspect of being a possible source of dirty money Is this something regulators might think important?
Russia, Bosnia, Belarus, Croatia, Serbia and Ukraine, all linked to Danske by the same Italian and Austrian banks. And it is certainly fair to say that Austria has been a favourite place for Ukranian Oligarchs to park their billions.
Absolutely nothing I have said here is evidence of any wrong doing. But if you have a bank, Danske Bank in Estonia, which is at the centre of a vast laundering scheme surely you don’t just look at the banks that moved the money out of Estonia into dollar accounts? That is only the back half of the laundering. Surely you should look for any banks that could have begun the laundering. And surely a reasonable pace to start, if only to rule them out, is the list of banks which Danske itself says are the banks it has close money-moving ties to?