(Bloomberg) -- September was the month when long-running failures to stop money-laundering came back to bite some of Europe’s largest banks.
Regulators from Switzerland to the Nordic region and Germany reprimanded institutions for failing to do enough to prevent illicit money flows. While some paid for past misdeeds, others were chastised for continued shortcomings and even had monitors assigned to help prevent future missteps.
The cycle of bad news might not be over: Denmark’s Danske Bank A/S still doesn’t know how much dirty money washed through its Estonian unit, though has said a vast part of $234 billion of funds that flowed through there were probably suspect. The Dutch regulator has also said that various of the country’s institutions are “insufficiently” addressing their anti-money laundering responsibilities.
Meanwhile, the European Commission’s latest proposals to improve policing of the issue underline how far the continent is from tackling the problem. Here are some of the biggest money laundering issues in Europe of the past month.
Danske Bank was the biggest case. The lender’s problems in stopping illicit flows -- including out of the former Soviet Union -- had emerged previously, but the sheer size of the scandal only became apparent after a report into the matter. The Danish lender said “a large part” of 200 billion euros ($234 billion) that flowed through its Estonian unit between 2007 and 2015 may have been suspicious transactions, prompting Chief Executive Officer Thomas Borgen to resign. Chairman Ole Andersen hasn’t been able to give a more precise estimate. The government has said it may fine the bank as much as $630 million.
Regulators and investigators in four countries, including the U.K. and Switzerland, are now trying to find out how much of the Danske money was laundered through their own jurisdictions. The bank’s shares have fallen by 11 percent in the past month and are down by nearly one-third this year. Goldman Sachs says the bank’s dividend and share buyback program may be suspended, while S&P has said its credit rating is under threat.
ING Groep NV Chief Financial Officer Koos Timmermans was the second senior European banking executive to pay the price for his institutions’ failings after the Dutch lender agreed to pay 775 million euros to settle an investigation into money-laundering between 2010 and 2016. The investigation focused on the bank’s role in matters including unusual payments by VimpelCom Ltd. to a company owned by a Uzbek government official. VimpelCom, which changed its name to Veon, pleaded guilty in 2016 to violating U.S. corruption laws
The fine -- coming just months after public outcry had derailed a pay increase for Chief Executive Officer Ralph Hamers -- revived public scrutiny of bankers in the country and the municipal government of Amsterdam to put a contract out to tender early. While the decline in ING’s shares was less pronounced than for Danske Bank, the size of the fine is putting into doubt investor hopes for a higher dividend. While the government called Timmermans’ departure an “appropriate” reaction, and the bank avoided further fines from U.S. authorities, the Dutch regulator has said it will take time to put ING’s house in order.
German regulator BaFin is taking the unprecedented step of installing a monitor at Deutsche Bank AG to speed the improvement of its anti-money-laundering controls. The move was prompted by Deutsche Bank’s insufficient efforts to improve its controls rather than a specific case of money laundering, two people familiar with the matter said. The lender had said in the summer that the automated processes it was using to flag suspicious transactions were not working well -- an admission that itself came barely a year after it was fined almost $700 million for failing to stop suspicious transactions out of its Russian operations.
The monitor will join five more who have been appointed to keep track of the bank’s progress in addressing other governance failures. In a twist, it emerged that Deutsche Bank had stopped doing correspondent bank business with Danske in Russia years ago, after warning the Danish bank about the suspicious nature of some transactions.
BaFin’s public reprimand of Deutsche Bank came only days after its Swiss counterpart reprimanded Credit Suisse Group AG for poor anti-money-laundering controls. It gave the bank until the end of 2019 to improve, after completing a review spanning the decade from 2006 to 2016. The regulator, known as Finma, ordered the Zurich-based lender to ensure that information about particular clients can be accessed more easily by bankers.
The bank has had relationships with officials of world soccer body FIFA and Brazilian oil and gas giant Petrobras SA, both of which have been at the center of high-profile corruption scandals. Jorge Arzuaga, a former Credit Suisse and Julius Baer Group Ltd. employee, last year became the first banker to admit guilt in the U.S. investigation into FIFA corruption.
Swiss private bank Julius Baer, at least indirectly, also found itself linked to money laundering probes. Matthias Krull, once a senior relationship manager with the Zurich-based Baer, was released on a $5 million bail bond while he awaits sentencing after pleading guilty to money-laundering charges in the U.S. Prosecutors charged him with helping conceal $1.2 billion embezzled from crude producer Petroleos de Venezuela SA.
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