Analysts say Danske Bank fines could hit $8 billion in money laundering scandal

REUTERS/Ints
Kalnins

• Danske Bank, Denmark’s biggest lender, has been
  rocked by a money-laundering scandal which may have involved
  $235 billion.
• If the bank is found guilty of any wrongdoing it will
  likely face a significant fine.
• One estimate suggests the fine could be as high
  as 53 billion Danish krone ($8.3 billion), while others
  believe somewhere in the hundreds of millions of dollars is
  more likely.
• The bank has not yet been found to have done anything
  wrong, so a fine may not be levied at all.

The scandal surrounding the Estonian arm of Denmark’s biggest
lender, Danske Bank, is one of the biggest in the financial
sector in many years.

Danske Bank admitted on Wednesday that as much as $235 billion of
transactions flowing through its Estonian branch between 2007 and
2015 may have been suspicious, and connected to potential money
laundering.

So far,
the bank’s CEO, Thomas Borgen has resigned, saying that
while an investigation into the branch found no legal wrongdoing
from him, he believed the best course of action was to stand
down.

“It is clear that Danske Bank has failed to live up to its
responsibility in the case of possible money laundering in
Estonia,” he said in resigning on Wednesday.

As well as Borgen’s resignation, Danske has already had to
contend with a sharp drop in its share price as investors pull
out in anticipation of possible regulatory and legal punishments
on the back of the scandal.

Going forward, however, another major issue the bank is likely to
have to contend with is one or more substantial fines for its
failings in the scandal. No one knows how much any potential fine
will be yet, or even if any will be levied, but early estimates
range from hundreds of millions of dollars, to billions.

Perhaps the biggest estimate of how much the fine may be so far
comes from Danish bank Jyske Bank, a key competitor of Danske
Bank.
According to a column from Breakingviews, analysts at Jyske
have calculated that the heaviest penalty for Danske Bank could
amount to 53 billion Danish krone ($8.3 billion).

That is based on about $150 billion of the Estonian transactions
being fraudulent, and regulators following the penalties they
have imposed on the likes of Deutsche Bank and BNP Paribas in
previous incidents.

Most estimates are significantly less extreme than that outcome.
Credit Suisse, for example, said in a note on Wednesday that
markets are expecting the total fine to be below 15 billion krone
($2.3 billion), around 28% of the most pessimistic forecast
from Jyske.

The Danish government has also put a smaller number on a
potential fine for Danske Bank if it is found to have committed
any wrongdoing.  The Danish government said on
Wednesday afternoon it could be looking to levy a fine of 4
billion kroner ($630 billion) in the event wrongdoing is
proved.

According to Bloomberg that estimate is “based on an
assumption that the bank’s profits from transactions tainted by
laundering amount to about 1.5 billion kroner ($235
million.)”

Danske Bank has not yet been found to be responsible for
anything connected to the scandal, so it is possible that it
could avoid a fine altogether.

The bank has already received a fine for violating anti-money
laundering rules in relation to the monitoring of
transactions to and from correspondent banks. In December last
year, it was hit with a 12.5 million krone ($2 million)
fine. That fine, however, did not concern its Estonian
operation.