STREAMING NOW: Watch Now

European banking still has a massive money laundering problem

First it was HSBC. Then ING. Now Danske Bank. European banks are still uncovering money laundering on a vast...

Posted: Sep 20, 2018 2:57 PM
Updated: Sep 20, 2018 2:57 PM

First it was HSBC. Then ING. Now Danske Bank. European banks are still uncovering money laundering on a vast scale.

Danske Bank, Denmark's largest bank, admitted Wednesday that an internal investigation had uncovered a large number of suspicious accounts and transactions at its branch in Estonia.

The bank said the branch handled about €200 billion ($235 billion) for around 15,000 foreign clients, some from Russia, between 2007 and 2015. It said that the "vast majority" of the 6,200 customers it has investigated so far were "suspicious."

CEO Thomas Borgen said he would step down once a replacement is found, and Denmark's regulator said it would reopen its own investigation.

But the problem isn't going to disappear with the departure of one executive.

It's not because the European Union's anti-money laundering regulations are weak. It's that they're not very well enforced.

HSBC agreed in 2012 to pay $1.92 billion to settle money-laundering allegations with US regulators. Authorities said HSBC allowed the most notorious international drug cartels to launder billions of dollars across borders.

The case sparked a wave of anti-money laundering campaigns and reforms across the world, including in the European Union.

But more cases keep popping up. ING agreed earlier this month to pay €775 million ($900 million) to Dutch regulators after admitting poor controls allowed criminals to launder money through its accounts.

Fragmented and inconsistent regulation

"There are very limited sanctions enforced in some countries and the supervisory bodies at the national level don't always do their job," said Laure Brillaud, an expert on money laundering with Transparency International.

The main problem: Europe does not have one single organization charged with stamping out the crime. The three main European financial regulators combined have just two officials working full-time on money laundering prevention.

The bulk of responsibility lies with national watchdogs, and some are just not up to the job.

"Recent cases in the banking sector showed that they are not always supervised and enforced with the same high standards everywhere across the EU," said Vĕra Jourová, Europe's top justice official. "Our system is as strong as our weakest link," she added.

Because of the way the European Union works, once dirty money enters the banking system in one of 28 countries, it can be easily moved around.

The European Commission is now proposing stronger rules governing the work of national watchdogs.

The Commission wants EU member states to share more information, and for regulators and banks to talk more.

Red flags were ignored

Brillaud said that penalties imposed on EU member states that fail to police money laundering properly could lead to better oversight, a step the Commission has not yet taken.

Regulators in Europe and the United States have also been pushing banks to do a better job at getting more information about their clients and the sources of their wealth.

Jonathan Peddie, a partner at Baker & McKenzie, said that banks have also been struggling to implement effective controls when it comes to money laundering — especially when it comes to foreign clients.

"Everybody understands what the law says and everybody understands the perspective that they are supposed to take in respect to the risk ... but it's always been very hard for them to meet the expectations," he said.

Danske Bank admitted Thursday that the management of the bank had failed to act on several red flags raised by Russia's central bank and regulators in Denmark and Estonia over the years.

Oregon Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 19097

Reported Deaths: 326
CountyConfirmedDeaths
Multnomah445092
Washington283023
Marion266767
Umatilla199624
Clackamas140136
Malheur67310
Deschutes5378
Lane5183
Lincoln3919
Union3882
Jackson3851
Yamhill35911
Jefferson3103
Morrow3041
Polk28812
Linn24810
Klamath1941
Hood River1690
Wasco1613
Benton1556
Douglas1321
Josephine1051
Coos840
Clatsop800
Columbia780
Crook431
Lake320
Baker300
Tillamook280
Wallowa191
Curry140
Sherman140
Harney80
Gilliam40
Grant20
Unassigned00
Wheeler00

California Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 512175

Reported Deaths: 9396
CountyConfirmedDeaths
Los Angeles1921774693
Orange37391651
Riverside37011695
San Bernardino32980417
San Diego29883565
Kern20545144
Fresno15083138
Alameda11524189
San Joaquin11483168
Santa Clara10626191
Sacramento10067142
Tulare9454178
Imperial9409220
Stanislaus9061110
Contra Costa7966125
Ventura734476
San Francisco681161
Santa Barbara616760
San Mateo5544119
Marin499470
Monterey482230
Kings438056
Merced428550
Solano361137
Sonoma305537
Madera194330
Placer192516
San Luis Obispo178315
Yolo154442
Santa Cruz11524
Butte9417
Napa8888
Sutter7866
San Benito6434
El Dorado6371
Lassen6310
Yuba4854
Shasta3699
Glenn3251
Colusa3234
Mendocino3179
Nevada2991
Tehama2341
Humboldt2334
Lake1951
Mono1451
Tuolumne1412
Amador1260
Calaveras1251
Del Norte880
Siskiyou730
Mariposa562
Inyo511
Plumas330
Trinity50
Alpine20
Modoc20
Sierra20
Unassigned00
Medford
Clear
73° wxIcon
Hi: 94° Lo: 62°
Feels Like: 73°
Brookings
Overcast
57° wxIcon
Hi: 68° Lo: 54°
Feels Like: 57°
Crater Lake
Clear
68° wxIcon
Hi: 83° Lo: 54°
Feels Like: 68°
Grants Pass
Clear
72° wxIcon
Hi: 92° Lo: 58°
Feels Like: 72°
Klamath Falls
Clear
68° wxIcon
Hi: 86° Lo: 50°
Feels Like: 68°
Thunderstorm chances ahead
KDRV Radar
KDRV Fire Danger
KDRV Weather Cam

Community Events