Estonia: Danske Bank branch must close over alleged fraud

HELSINKI (AP) — Estonia's financial watchdog said Tuesday that the local branch of Danske Bank must close after the financial group admitted that massive amounts of money from Russia and former Soviet states had been laundered through the subsidiary.

The Estonian Financial Supervisory Authority said the activities of Denmark's largest financial institution must cease in Estonia within eight months.

Danske Bank responded by saying that it will close its banking activities in all three Baltic countries and in Russia.

The Copenhagen-based bank admitted in September that some 200 billion euros ($226 billion) had flown through accounts at its Estonian branch from 2007 to 2015, following reports of transfers, including from family members of Russian President Vladimir Putin.

Kilvar Kessler, chairman of the supervisory authority, said Tuesday that "the serious violations" had caused damage "to the credibility of the Estonian financial environment."

"We have every right to put an end once and for all to this very exceptional and unfortunate case, as serious and large-scale violations of the local rules have been committed in Estonia through the branch of a foreign bank," Kessler said.

He added that the case has dealt "a serious blow" to the transparency, credibility and reputation of the financial market of this small Baltic country of 1.3 million.

Estonian authorities also demanded that Danske Bank present an action plan in the next 20 days.

"We acknowledge that the serious case of possible money laundering in Estonia has had a negative impact on Estonian society and ... finds it best that Danske Bank discontinues its Estonian banking activities," said Jesper Nielsen, Danske Bank's interim chief executive.

"We will close down our remaining activities as requested," he said, adding Danske Bank will continue cooperating "with the Estonian and other relevant authorities."

He added that activities in Latvia, Lithuania and Russia also would be shut down, saying "Danske Bank has for some time considered the future of its remaining activities" in the region. However, Danske Bank's shared services center in Lithuania will continue its operations.

Danske Bank has some 15,000 clients with deposits and loans at its unit in Estonia. Estonia's central bank said the closure would not have a big impact on the local economy as Danske Bank had already stopped providing services to private individuals and local businesses.

Last year, 10 former employees at Danske Bank's Estonia branch were detained in connection with the scandal.

They were mainly Danske Bank client managers suspected of knowingly assisting large-scale money laundering that involves Azerbaijan and Georgia, two former Soviet republics.

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Jan M. Olsen in Copenhagen, Denmark, contributed to this report.