Bank of America, Deutsche Bank and J.P. Morgan moved money OUT of Danske and in to dollar denominated accounts elsewhere. But that is only half the story.
By David Malone and cross-posted from his blog, Golem XIV
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…