Thomas Borgen, chief executive of Danske Bank, will step down over allegations his bank was at the center of an extensive European money-laundering scandal with as much as $234 billion flowing through a tiny Estonian unit.
The money-laundering case has shocked Denmark, a country generally associated with some of the world's lowest levels of corruption and highest levels of transparency. Criminal complaints against Danske have so far suggested its Estonian unit was used to launder as much as $9.1 billion between 2007 and 2015, with the illicit funds stemming mostly from Russia. Wednesday's report doesn't make clear how large a chunk of the total flows might have been laundered.
Official investigations are ongoing in Denmark and Estonia, and Danish media outlets reported last month that U.S. authorities are also looking at the case. Analysts and investors said that Danske's long-awaited report still left a lot of key questions unanswered.
Danske said it can't provide an accurate number for how much dirty money it may have laundered. But the bank's $234 billion estimate of total flows through its Estonian unit raises questions about how serious management was about preventing money laundering.
The report "unfortunately does not draw a line under the issue as we had hoped," analysts at Citi Research wrote in a client note. At Jefferies, analysts pointed out that the bank didn't refer to any sanctions violations, "which is a relief given concerns" of an investigation by U.S. authorities. "It's unclear what the basis of any fine is at present," Jefferies said.
Shares in Danske fell more than 8 percent in the Danish capital, Copenhagen, bringing losses this year to 32 percent. Since its latest peak in May 2017, Danske's market value has plunged by about $14 billion.
Borgen, who was promoted to run Denmark's biggest bank in 2013, will continue in his job until a replacement is found, Danske said Wednesday. It didn't give any indication of how long that might take.
"It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia," Borgen said in the statement. "I deeply regret this."
At a news conference, Chairman Ole Andersen hinted he may also resign but said he felt it made more sense to stay on, for now, to deal with the "task" at hand.
The total flows in the Estonian unit between 2007 and 2015 cover about 15,000 accounts, of which Danske says roughly 6,200 have the "highest risk indicators." The bank said "almost all of these customers have been reported to the authorities."
Danske is the latest in a string of big European banks to have been tainted by money-laundering scandals, prompting authorities in the bloc to look into tougher measures. Deutsche Bank AG was fined almost $700 million last year for helping wealthy Russians move about $10 billion out of their country. ING Group NV earlier this month agreed to pay about $900 million to settle a laundering case.
Analysts surveyed by Bloomberg have estimated that Danske may need to pay about $800 million in fines for its breaches. The bank made no mention of provisions in Wednesday's news release.
Borgen, 54, is leaving after five years at the helm of Denmark's biggest bank. His career spanned a number of key roles at Danske, most notably, as head of its international operations while much of the laundering was taking place. Wednesday's report shows Danske was warned as early as 2007 that there were suspicious transactions taking place at the Estonian unit, followed by a steady flow of continuous red flags thereafter.
The scandal has triggered widespread indignation across Denmark, with both the government and the central bank warning that Danske's involvement in money laundering could hurt the reputation of Denmark's entire financial system. S&P Global Ratings even said the case might end up affecting Denmark's AAA credit rating.
The government has already made clear that Wednesday's report won't be the final word on the case, pointing to ongoing criminal investigations in Denmark and Estonia, which are likely to drag on for several months.
Danske also cut its full-year outlook on Wednesday, partly due to a $230 million so-called donation it plans to make to an independent foundation to support the fight against international financial crime. The amount equals profit from suspicious transactions that took place in the nonresident portfolio of its Estonian branch from 2007 to 2015.
Information for this article was contributed by Anna Molin, Hanna Hoikkala and Ott Ummelas of Bloomberg News.
Business on 09/20/2018