The European Banking Authority (EBA) launched an investigation into the work of the financial regulators in Denmark and Estonia, both of which are having to respond to allegations of possible major breached of EU law stemming from approximately €200 billion of suspicious payments that were channelled from Russia, Ukraine, and other former Soviet republics through the Estonian branch of Danske Bank from 2007 to 2015.
If found to be in breach of EU law, Danske Bank could face a fine equal to 10% of its turnover. The lender will also have to leave the Estonian market as it has been instructed to return customer deposits and transfer its loan contracts. Danske has announced it will also be closing its Latvian, Lithuanian, and Russian branches.
The magnitude of this money-laundering case has raised concerns regarding the function of Estonia’s Financial Services Authority and the Danish Financial Services Authority.
The EBA’s investigation is the second of its kind in recent years after the watchdog made handled a similar case regarding the activities of Malta’s Financial Intelligence Analysis Unit in relation to its supervision of anti-money laundering requirements at the Mediterranean island nation’s Pilatus Bank.
Pilatus later had its licence withdrawn by the European Central Bank in November 2018 and was officially closed after its Iranian chairman and owner, Ali Sadr Hasheminejad, was charged in the US in connection with money-laundering and fraud.
The bank was known to have held accounts for a senior official in the government of the Maltese prime minister, Joseph Muscat, and members of Azerbaijan’s ruling Aliyev family.
Accusations that Pilatus Bank was processing illegal payments was first brought the public’s attention by investigative journalist Daphne Caruana Galizia, who was killed in October 2017 by a car bomb shortly after certain details of her reports were circulated.