Deutsche Bank Linked to $150 Billion in Danske Probe Deutsche Bank Faces Scrutiny in Danske Probe -- WSJ
21 November 2018 - 7:02PM
Dow Jones News
By Jenny Strasburg and Patricia Kowsmann
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 21, 2018).
Preliminary findings of an internal review by Deutsche Bank AG
of its role in a massive money-laundering scandal at Danske Bank
suggest the German lender handled about $150 billion of the total
amount of potentially suspicious transactions tied to Danske,
according to a person familiar with the matter.
Deutsche Bank's findings aren't final and haven't been made
public. It has been trying to assess its exposure to allegations of
money laundering involving flows from Russia and elsewhere through
Denmark's largest bank. U.S. law enforcement agencies are probing
transactions at Danske's tiny Estonian branch over several years
through 2015 where $230 billion flowed through accounts of
non-Estonian account holders at the branch.
On Monday, a British former trader at Danske's Estonian branch,
Howard Wilkinson, testified publicly at a Danish parliamentary
hearing about the scope of the alleged activity he witnessed at the
small outpost.
Investor concerns about the impact of the Danske scandal have
contributed to a drop in Deutsche Bank shares which are down more
than 48% this year and hit new lows of near EUR8 ($9) Tuesday.
The shares had partially recovered by midday Tuesday in Germany,
trading near EUR8.30, representing a 3% decline for the day. The
Stoxx Europe 600 Banks index was down 1.8%.
The Danske concerns come as Deutsche Bank's shares have fallen
on broader doubts about its profitability.
"Deutsche Bank acted as correspondent bank for Danske Bank in
Estonia," a Deutsche Bank spokesman said. "Our role was to process
payments for Danske Bank. We terminated this relationship in 2015
after identifying suspicious activity by its clients."
Deutsche Bank has received requests for information from U.S.
officials about Danske-related transactions, according to people
familiar with the matter.
Mr. Wilkinson, who worked at Danske's Estonian branch until
2014, pointed fingers at the three U.S. correspondent banks that
cleared U.S. dollars for Danske Estonia for not catching suspicious
flows of money. He singled out Deutsche Bank, referring to it only
as the U.S. subsidiary of a European bank that served Danske
throughout the period under investigation, between 2007 and
2015.
"This was the major correspondent bank for U.S. dollars, so when
we are talking about this $230 billion number of suspicious funds,
I would guess that $150 billion went through this particular bank
in the U.S.," he said.
His estimate roughly matches Deutsche Bank's own preliminary
findings, according to the person familiar with that review.
Correspondent banks serve as intermediaries in international
transactions, handling transfers for other banks doing business in
countries where they have limited operations.
Deutsche Bank handles $450 billion to $500 billion in U.S.
dollar transactions, on average, each day, according to a person
close to the business.
JPMorgan Chase & Co. served as correspondent bank for Danske
Estonia until 2013, when it was replaced by Bank of America Corp.,
which cut ties with the Estonia branch over money laundering
concerns in 2015. Those banks have declined to comment.
In September, Danske Bank said in reporting findings from a law
firm it hired that around $230 billion washed through its Estonian
branch via thousands of accounts. A large part was deemed
suspicious. The bank's CEO resigned with the release of the
report.
Deutsche Bank is a major correspondent bank for U.S. dollar
transactions. Banks are responsible for policing such money flows
and flagging transactions they deem suspicious. Suspicions can be
based on origin of funds or concerns about who's sending or
receiving money.
Deutsche Bank has come under fire repeatedly from U.S. and
European watchdogs for weaknesses in its policing of financial
crime. The unit responsible for money-laundering has suffered
high-level turnover. In recent months, its global and U.S. heads of
financial crime-fighting have both left for jobs at other banks.
The global head, Philippe Vollot, joined Danske Bank as chief
compliance officer and an executive board member.
Write to Jenny Strasburg at jenny.strasburg@wsj.com and Patricia
Kowsmann at patricia.kowsmann@wsj.com
(END) Dow Jones Newswires
November 21, 2018 02:47 ET (07:47 GMT)
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