Danske Bank conducted mirror transactions in the amount of 6–8.5 billion euros ($ 6.9–9.8 billion) for Russian clients in one year alone, follows from a memo that helps you imagine how the scheme for withdrawal from Russia and others worked CIS countries, which may be the largest case of money laundering in history.
The document, which familiarized Financial Times (FT), noted that the “highly profitable” strategy was risky, not least because Danske bankers did not know the end customers for whom these transactions were conducted. In the Estonian branch, through which they were carried out, they were called “solution” and “bond loop”, because Russian government bonds were used in the scheme. Russian clients bought papers for rubles, and exactly the same were sold for foreign currency.
The client transferred the ruble to an intermediary who bought government bonds on them and transferred to the Danske account in the Moscow branch of Citi. Then the intermediary sold Danske government bonds for the currency, and the bank immediately transferred the funds into their payment to his account. Then the intermediary transferred the currency to the client’s partner.
According to Graham Barrow, an independent consultant and former regulator, he, as an anti-money-laundering specialist, is worried about some elements of the note: destinations means. "
After FT published the details of the scheme on Friday, Danske shares plunged 10%, which was the most significant fall in seven years. The bank has already lost 43% of capitalization since the first details of money laundering operations through the Estonian branch appeared eight months ago. The size of suspicious transactions related to the withdrawal of money from Russia, Azerbaijan and other CIS countries, according to the results of the internal investigation, Danske estimated at 200 billion euros ($ 234 billion) in 2007–2015.
The income from mirror transactions in a memorial is estimated at 10 million euros. It does not name the year when they were held, but the Danske report, which was published following the results of the investigation, refers to a document written in a similar way, and it was reviewed by the bank in October 2013. The note with which the FT was reviewed indicated that 60 % of income, or 6 million euros, amounted to brokerage commissions in the amount of 0.07–0.1%. Based on this, FT considered that the total amount of transactions could be 6–8.5 billion euros.
The bank’s report states that the deals were made for 10 customers who were intermediaries for other customers, about which Danske did not have “full information”. It also notes that the original version of the note referred to the risks associated with money laundering, but this reference was excluded from its final version.
Mirror deals with Russian government bonds will allow customers to make international payments "in a faster, cheaper and more reliable way," the note says. “There is a potential reputational risk [that Danske will be perceived as] helping to“ capital outflow ”from Russia,” it says. - This is in any case a risk that is also associated with other areas of our business with non-residents, where the natural flow of money is always directed from Russia. <...> Given the good income from this decision, the risk-return ratio seems very attractive. ” The risk can be reduced if you only conduct transactions with accompanying documents that they are payments for goods and services, as well as limit their daily volume, is indicated in the note.
It is not known how many such operations were carried out in other years, but the note says: “This decision is likely to be temporary, since the regulation in Russia is likely to change to bring this decision in line with existing currency control regulations”.
Investigations against Danske lead regulators in six countries. The United States, which opened a criminal case, has already been punished for mirror transactions. Last year, US and UK financial regulators financed Deutsche Bank for $ 630 million for using such operations for allegedly laundering $ 10 billion from Russia in 2011–2015, and then the US Federal Reserve fined it for another $ 41 million.
Deutsche was one of the correspondent banks of the Estonian branch of Danske, which carried out dollar settlements for it, but stopped doing so in 2015 due to concerns about suspicious customers. The Danish newspaper Berlingske reported that several intermediaries with whom Deutsche conducted its mirror transactions were also clients of the Estonian branch of Danske. Among them is the company IC Financial Bridge, the main shareholder of which was Alexander Perepelichny. He was an informant on the Magnitsky case, but died suddenly while jogging near his home in Surrey in 2012.
The memo was prepared by two then-Estonian employees Yuri Kidyaev and Howard Wilkinson for his leadership. Wilkinson, the branch director of markets, later sent several emails to Danske executives in Copenhagen, reporting as an informant about money laundering in the unit. In particular, he said that Danske had made numerous deals with British limited partnership companies, including Lantana Trade LLP, whose beneficial owners could allegedly be people from the family of Russian President Vladimir Putin and the FSB. The Kremlin denies any links between Putin and Danske.
Wilkinson did not see the final version of the note, but during its preparation he explained that he was responsible only for market analysis, and not for information on the fight against money laundering and clients, said his lawyer Stephen Cohn. “In particular, Wilkinson wrote a piece that was removed from the final version of the note. It said: “And so this solution could potentially be used for money laundering,” says Kon.
Kijaev confirmed that he “participated in the writing of the report,” but the rest of the questions were redirected to Danske. Danske declined to comment.