Deutsche Bank handled $150B of possibly wary flows tied to Danske
German lender’s shares drop on investor concerns
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 (U.S.) 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 8 euros ($9) Tuesday.
The shares had partially recovered by midday Tuesday in Germany, trading near 8.30 euros, 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 respon- sible 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.