Explainer: the Danske Bank's 200 billion euro money-laundering scandal

COPENHAGEN (Reuters) – Danske Bank (DANSKE.CO) was involved in one of the biggest money laundering scandals. Howard Wilkinson, the whistleblower who alerted Denmark's largest bank on the issue, testified in the Danish Parliament on Monday.

How important is scandal?

Some 200 billion euros ($ 227 billion) in payments passed through the non-resident portfolio of Danske Bank's tiny Estonian branch between 2007 and 2015. The bank finally commissioned a report that concluded in September that many of these payments were suspicious.

Where did this money come from?

Most payments came from Estonia, Russia, Latvia, Cyprus and Great Britain, the report said. Shell companies have the habit of concealing the identity of the people involved, told Reuters former president Ole Andersen.

AND WHERE HAS IT WENT?

Payments were made to Estonia, Latvia, China, Switzerland, Turkey, Britain and more than 150 other countries, the report said.

Who mowed the whistle?

Howard Wilkinson, head of the bank's bargaining unit in the Baltic States from 2007 to 2014, was the whistleblower who had warned the Copenhagen Executive Board in 2013 and 2014 against suspicious activities in the Estonian branch, the Danish daily Berlingske reported in September.

WHY HAS THE AUTHORITIES ACCEPTED LATER?

Denmark's financial supervision is the subject of an investigation by the banking supervisor of the European Union. The Danish Minister of Trade accused the regulator of being too critical of the bank and trusting it too much.

Has anyone been found responsible?

Not yet. The case is currently under criminal investigation in Denmark, Estonia and the United States.

One of the Danish prosecutor's investigations is whether senior management can be held personally liable.

The British National Crime Agency (NCA) said it was investigating the use of companies registered in the UK.

CONSEQUENCES FOR DANSKE BANK?

The Danish financial regulator said the bank's compliance and reputation risks had risen and its capital requirements had risen by DKK 10 billion ($ 1.5 billion).

In May, the regulator, still examining the case, imposed eight reform orders and eight reprimands.

Has someone taken the blame?

Danske Bank's former managing director, Thomas Borgen, resigned, claiming that even though he had been "personally laundered from a legal point of view", he was assuming "the ultimate responsibility".

The Maersk family, which controls about 21% of the bank's shares, overthrew President Ole Andersen and appointed Karsten Dybvad, President of the Confederation of Danish Industry.

WHAT IS IN DANSKE ACTIONS?

Danske Bank's shares traded 40% below their level at the end of February, even after a slight rise when its November 1 earnings report showed an increase in loans in the third quarter despite the scandal. tmsnrt.rs/2PvfSwZ

WHAT'S NEW FOR DANSKE BANK?

The US investigation worries Danske Bank shareholders because US fines tend to be much heavier than those in Denmark, Estonia and Europe in general.

For many, the worst case scenario is that the bank will suffer the same fate as the Latvian bank ABLV, which lost access to dollar funding when US authorities accused it in February of covering money laundering by forcing its closure.

Danske Bank said that the two cases could not be compared because it had allowed to close the part of the Estonian company suspicious.

The US authorities also claimed that ABLV was against the sanctions imposed on North Korea.

Danske Bank stated that it did not find any breaches of the sanctions.

ARE THERE MORE CONSEQUENCES FOR DENMARK?

The Danske Bank is an integral part of Danish companies and the scandal arises as a result of a tax scandal for the government. A case of fraud at the Ministry of Social Affairs has undermined trust in the institutions on which its welfare society is based.

The case also poses a risk to the Danish financial sector as a whole, the Systemic Risk Board said in September, prompting the government to increase the cash buffer that financial companies must keep to protect themselves from economic shocks.

What does the bank say in its defense?

Danske Bank acknowledged that its money laundering controls in Estonia were inadequate.

But in its September report, the board of directors stated that the board had not breached its legal obligations.

Since then, the bank has strengthened its compliance efforts with approximately 1,000 of its 20,000 employees.

IS IT ONLY DANSKE BANK?

Danske could only represent the "tip of the iceberg" and investigators should look at major Western banks, Wilkinson's attorney told Reuters.

HOW TO PREVENT A REPETITION?

Denmark plans to strengthen its financial regulator, while a large majority of the Danish parliament has agreed to strengthen its anti-money laundering legislation, including increasing penalties up to 700 %.

The states of the European Union are still divided over a redesign of banks' anti-money laundering control rules, two EU sources told Reuters.