Danske Bank Faces U.S. Inquiry Over Money Laundering

COPENHAGEN, Denmark — Danske Bank, which last month acknowledged failing to prevent suspected money laundering at its Estonian branch, has now drawn the attention of U.S. authorities.

In a statement on its website, the Danish lender said it was cooperating with the Department of Justice in a criminal investigation of flows of money out of the bank’s branch in Estonia. Denmark’s financial regulator and authorities in Estonia and Britain have already initiated investigations.

“We are cooperating with the authorities investigating us as a result of the case,” the bank’s interim chief executive, Jesper Nielsen, said. " However, it is too early to speculate on any outcome of the investigations.”

Nielsen took office Monday, succeeding Thomas F. Borgen, who stepped down after the release of an internal report on unusual money flows coming from the bank’s Estonian branch.

The 87-page report, prepared by lawyers hired by the bank, found misconduct stretching from 2007 to 2015 at the branch, and estimated that total flows of 200 billion euros, or $234 billion, could be unlawful.

It said that the bank received and ignored repeated warnings from regulators and employees over its accounts from entities not living in Estonia, including a 2007 warning from the Russian central bank that “tax and custom payments evasion” was flushing through the bank. Russian authorities also said they suspected “criminal activity in its pure form, including money laundering,” estimated at “billions of rubles monthly,” the report found.

The bank didn’t react to the warnings and allowed the flow of money from suspected criminals from ex-Soviet countries into the legitimate international banking system, the report found.

In 2013, JPMorgan, the Estonian branch’s correspondent bank for clearing dollar transactions, ended the relationship because of the U.S. lender’s concerns with the nonresident portfolio. That prompted Danske Bank to start a review of its clients, but the review was never concluded, the report said.

The same year a whistleblower alerted top management, but the bank took another couple of months to react. The nonresident portfolio was finally closed in 2015, but it took an investigation from Berlingske, a Danish newspaper, for the scandal to come to public attention.

“None of us can grasp that this had been going on,” Ole Andersen, Danske Bank’s chairman, said at the presentation of the internal report.

Denmark’s financial regulator has reopened an investigation into the bank’s conduct. Its first inquiry, completed in May, found “serious deficiencies in the bank’s governance” and issued eight reprimands and eight actions to be taken, including setting aside money to prepare for fines and expenses associated with the money laundering allegations.

On Thursday, the regulator doubled the capital requirement to cover risk associated with the investigation, to $1.54 billion.