Deutsche Bank processed an additional €31bn of questionable funds for Danske Bank than previously thought, increasing its exposure to the world’s biggest money-laundering scandal.
In addition to the $150bn (€132bn) that Deutsche cleared for Danske’s tiny Estonian branch between 2007 and 2015, the German bank also processed another €31bn, according to an internal memo seen by the Financial Times.
This means that in total, Deutsche processed four-fifths of the €200bn Danske has identified as flowing through its Estonian branch from clients from Russia and other former Soviet countries. Around 1m transactions were processed by Deutsche over the eight-year period, according to the memo.
The revelation heaps more pressure on Deutsche, which is facing pressure from authorities on both sides of the Atlantic on a number of fronts, from investigations stemming from the Panama Papers scandal, to an unresolved issue with US prosecutors over its own role in helping Russian clients to move large amounts of money out of the country.
The bank has already been asked for information by the US Department of Justice over its role as a correspondent bank for Danske’s Estonian branch. A senior Deutsche source said that Deutsche was co-operating with “inquiries from a number of authorities” over the Danske transactions.
Howard Wilkinson, the former Danske executive who warned managers in Copenhagen about the suspicious fund flows in 2013 and 2014, told Denmark’s parliament last month that of the $230bn of potential dirty money that flowed through its Estonian branch, $150bn went through the “US subsidiary of a European bank”.
Danske’s Estonian branch offered non-resident clients accounts in various currencies, including dollars, euros and Swiss francs, according to people familiar with the situation.
Deutsche quit its role clearing dollars for the branch in 2015 after the German lender’s internal controls started to flag a rising amount of suspicious transactions, which the bank reported to authorities.
Deutsche told the Danish bank that year that despite a reduction in payments from Estonia in the previous two years, there had been an increase in the proportion of suspect cases the German lender was having to investigate from the small branch. It told Danske that in only three months, it had flagged 16 cases linked to narcotics and identity theft, according to another memo seen by the FT.
In total, the German lender filed hundreds of so-called suspicious activity reports about the branch to supervisors, according to people familiar with the situation.
Even though it stepped away from dollar clearing, it still processed euro payments for Danske, with total volumes between October 2015 and October 2018 totalling €225m.
Eurozone banks such as Deutsche are legally obliged to process standard cross-border money transfers within Europe for Danske Estonia, as both Germany and Estonia are part of what is known as the Single Euro Payments Area.
Deutsche declined to comment. Danske did not immediately return a request seeking comment.
Deutsche is already vulnerable to action from the DoJ, which is still investigating its role in the mirror-trade scandal. The controversial strategy— which Danske also undertook for Russian clients — involved buying securities in roubles then selling identical ones for foreign currencies such as US dollars. Deutsche paid $630m to US and UK authorities in 2017 but the DoJ’s investigation is continuing.