Four Global Banks Involved In Yet Another Money Laundering Scheme

[Hydrogen]

Money laundering is a multi-bank phenomenon. Danske Bank Estonia has been revealed as the hub of a $234bn money laundering scheme involving Russian and Eastern European customers. But Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve's electronic settlement system. Big banks, in other words.

The entrance to Danske Bank's headquarter at Holmens Kanal in Copenhagen, Denmark. Danske Bank admits that it has been used to launder money from companies related to Russia. Transactions valued at $234 billion flowed through its small branch in Estonia between 2007 and 2015, a large part of which are believed to have been illicit. (Photo by Ole Jensen/Getty Images)

It appears that four big banks helped Danske Bank Estonia make its dodgy transactions. J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia. But how much responsibility do these banks bear for these transfers? Could they reasonably have been expected to know – or suspect - that the money was dirty?

Banks that make transactions on behalf of other banks are known as “correspondent banks”. In the past, correspondent banks often had little information about the originator or final recipient of the money they were transmitting. They simply trusted that their customer bank was acting legally and that its customers were above board. Old habits die very hard: in 2016, the correspondent banks involved in the FIFA corruption case, which include Citigroup, HSBC, Wells Fargo and Barclays, all claimed that they could not have known that the transfers were corrupt.

But these days, banks are expected to “know their customers’ customers”. They are supposed to conduct their own checks to make sure that they are not unwittingly being used to launder dirty money.

In the case of Danske Bank Estonia, one of the correspondent banks did suspect something was wrong. In 2013, J.P. Morgan terminated its correspondent banking relationship with Danske Bank Estonia because it was concerned that it was being used as a conduit for dodgy funds. Deutsche Bank, however, blithely continued to make U.S. dollar wire transfers on behalf of the Estonia branch’s non-resident customers after J.P. Morgan's departure. So did Bank of America, which replaced J.P. Morgan.

From 2014 onward, according to Bloomberg, Deutsche Bank started refusing to make transfers that looked particularly dodgy. But the transaction flow did not fall off dramatically until 2015, when Bank of America and Deutsche Bank both terminated their correspondent bank relationships with Danske Bank Estonia - Bank of America in May, and Deutsche Bank in September. A report from the Danish Financial Supervisory Authority (FSA) – Danske Bank’s regulator – says that an employee at one of these banks warned about the Estonian branch’s suspicious customers:

In that connection, a senior employee from the correspondent bank in question assessed that out of ten non-resident customers from the Estonian branch, the correspondent bank would be comfortable only with servicing one given the customers’ characteristics. The employee also warned Danske Bank against Moldovan customers and customers transferring money to Moldova.

According to the Financial Times, this was a Deutsche Bank employee.

But if Deutsche Bank employees were so aware of the suspicious nature of Danske Bank Estonia’s customers and the dodgy nature of some of the money flows, why didn't Deutsche Bank follow J.P. Morgan's example in 2013? Why was it the last to terminate its correspondent bank relationship?

At that time, Deutsche Bank was happily doing a spot of Russian money laundering itself – the “mirror trades” through its Moscow branch for which it last year paid fines totaling $630m to U.S. and U.K. regulators. I suppose it is entirely understandable that a bank that was actively laundering money for its own customers might be little concerned about money laundering by one of its customer banks. But this raises serious concerns about the adequacy of Deutsche Bank's AML processes - concerns that, as we shall see, refuse to go away.

The U.S. regulators are already sniffing round Danske Bank. If the FIFA investigation is anything to go by, their interest will not be limited to the Danish bank. They will also want to know what the correspondent banks thought they were doing. Deutsche Bank was the only correspondent bank to stay with Danske Bank Estonia throughout the period of its known money laundering, and it apparently continued the relationship despite knowing that the Estonian branch’s customers and transactions were suspicious. U.S. regulators might take a dim view of Deutsche’s behavior, especially given the $41m fine it was handed by the Federal Reserve in May 2017 for inadequate AML controls, and the “Problem Bank” designation awarded to its American subsidiary by FDIC.

It seems that BaFIN, the German regulator, thinks so too. Two days after Danske Bank released a report revealing the mammoth scale of its Estonian branch’s money laundering activities, BaFIN reprimanded Deutsche Bank for inadequate AML processes, and imposed an external supervisor to ensure it improved them. The notice on BaFIN’s website is short and to the point:

On 21 September 2018, in order to prevent money laundering and terrorist financing, BaFin ordered that Deutsche Bank AG take appropriate internal safeguards and comply with general due diligence obligations. The issued order is based on section 51 (2) sentence 1 of the German Money Laundering Act (Geldwäschegesetz – GwG).

To monitor the implementation of the ordered measures, BaFin has appointed a special representative in accordance with section 45c (1) in conjunction with section 45c (2) no. 6 of the German Banking Act(Kreditwesengesetz – KWG). The special representative is to report on and assess the progress of the implementation.

Ostensibly, this follows on from Deutsche Bank’s admission in August 2018 that its AML processes were patchy to say the least. But the timing is exquisite. Could BaFIN be warning off the U.S. regulators? “This baby is ours. We will deal with it.”

Whether or not BaFIN’s reprimand is directly connected with the money laundering revelations, the fact remains that Deutsche Bank has some serious questions to answer regarding its conduct during the period of its correspondent relationship with Danske Bank Estonia.

And so too do the other banks involved. Although their correspondent relationships were of shorter duration, both J.P. Morgan and Bank of America helped to facilitate the enormous dollar flows in and out of Danske Bank Estonia. And although the exact role of Citigroup’s Moscow branch is as yet unclear, the little we know about it sounds suspiciously like Deutsche Bank’s “mirror trades”.

Investigations into the Estonian money laundering scandal are only just beginning. There is much, much more still to be uncovered. But already, an all-too-familiar familiar name has emerged. Funny, isn’t it, how whenever there is some shady activity going on, Deutsche Bank is never far away?

https://www.forbes.com/sites/francescoppola/2018/09/30/the-banks-that-helped-danske-bank-estonia-launder-russian-money/

....

Allegedly four major banks are complicit in $234 billion dolllars laundered for suspect russians.

Guilty parties would appear to be JP Morgan, Bank of America, Deutsch Bank and Citigroup.

Post the above link the next time someone complains about crypto currencies being used to "launder" money.  

Russia may have used the laundered capital to circumvent sanctions imposed upon it by the EU. When banks provide this type of service for a country, they usually demand something in return in the form of political favors. This could allow them to gain leverage over leaders like Putin who would normally be more independent from banking systems.

This could have many far reaching implications(that will go neglected and unsaid), tbh I'm no expert.

edit: Fixed the source link.

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[davis196]

Cryptocurrencies are used for money laundering,but the scale is 100 times smaller.
The strange thing is that nobody is pissed off, because of that big money laundering scheme.People think that this is something normal for the "too big to fail" banks.If some crypto exchange gets caught in money laundering,all the mainstream media will start crying about how "evil" cryptocurrencies are.

[Brawnsugar]

The banking giants abroad have always been complicit in money laundering schemes from time immemorial. These guys are the same people who help rogue politicians from Africa launder billions of dollars to be stashed in their vaults. Many of these fraudulent activities are public knowledge, and a whole lot more are still secret. Rather than focus on the monumental fraud in these global giants, governments focus on cryptocurrencies as being the conduit for money laundering activities. More leaving the plank in their eyes and trying to remove the speck in another's eyes.

[Ranly123]

Cryptocurrencies are used for money laundering,but the scale is 100 times smaller.
The strange thing is that nobody is pissed off, because of that big money laundering scheme.People think that this is something normal for the "too big to fail" banks.If some crypto exchange gets caught in money laundering,all the mainstream media will start crying about how "evil" cryptocurrencies are.

You got it right. Sometimes people think that banks are the most reliable financial institutions but did not see how banks used their savings. Banks invest in real estate and other businesses using the money deposited by people who saved their money thinking that it's safe. I am thinking also that banks are the biggest legal money laundering scheme today that not everybody know about it.

[olubams]

From the beginning of time, banks have been a wheel in the development of the economy and at the same time they have been the cog in the wheel of development especially as it relates to money laundering. All over the world there have been rules and regulation to guides the affairs of banks and how they conducts their businesses but because of the people involved are the same people that would come up with the policies that would be needed and also would be the one strategizing ways to break such rule because their friends are involved and their own personal cuts have been guaranteed. If it is evidenced that they are complicit, they should be punished adequately.

[prtty2gal2]

Cryptocurrencies are used for money laundering,but the scale is 100 times smaller.
The strange thing is that nobody is pissed off, because of that big money laundering scheme.People think that this is something normal for the "too big to fail" banks.If some crypto exchange gets caught in money laundering,all the mainstream media will start crying about how "evil" cryptocurrencies are.

As in a whole lot smaller than you can imagine and the truth is that most of the money laundering that has been going on over the years are just banks who you think they are holier than thou, but the only reason they have gotten to where they are now is basically because they have been good with their shady dealings and covering it up has been their specialties.

Banks suck and that is the truth, and it is high time people started knowing these things that banks really do not have their best interests at heart and they should not even be listened to. Was it not the same top staff of JP Morgan that came out in the past to compare Bitcoin and cryptocurrency to fraud, and channel for fraudulent activities? The wind just blew their own tail feather to the public to show how hypocritical they are.

[dothebeats]

Isn't it ironic that these respected institutions are the ones who are quick to throw shade at bitcoin and cryptocurrencies as a vehicle for fraud and money laundering yet they are also the ones conducting large-scale money laundering themselves? Actually, it's easier and more difficult to follow where the trails lead once the money is converted into cold, hard cash, and this wouldn't be possible if banks are not in for the job. If their connection with the money laundering scheme is proven, this would be another blunder indicating that even the banking system isn't safe from these types of illicit activities.

[3acaga]

Why do these banks need an independent Bitcoin, when you can continue to wash dirty money for a good percentage of the transaction ...
P.S. They will not recognize Bitcoin for a very long time ...

[The Sceptical Chymist]

Can't say I'm surprised by any of this.  I only follow one banking stock, Bank of America, and it's taken quite a hit over the past couple of days, and it's down 1% today as I'm writing this. 

I'd love to see some heads roll for this, but it's always been the case that they can escape the consequences of their actions, and the sad part is that their actions can have very bad effects and can affect a LOT of people.  The problem is that they have too much political leverage and way too much power.

And yeah, the problem of money laundering using cryptocurrency is so much smaller than what these banks did/are doing.  Compared to the banks, laundering money with bitcoin is a tiny drop in a very big bucket.

[HeRetiK]

[...]

Guilty parties would appear to be JP Morgan, Bank of America, Deutsch Bank and Citigroup.

[...]

And it's likely just the tip of the iceberg.

Banks laundering money at scale appears to be one of the largest and dirtiest open secret in finance. It's a farce how the general populace is under general suspicion with tighter and tighter restriction on cash transactions and anonymous payments (eg. EUR 1,000,- limit for cash transactions in France [1], tightening regulation on anonymous prepaid options) while banks continue laundering money in the billions, effectively laundering money as a service for anyone with deep enough pockets (because obviously laws only apply to the common people).

[1] https://www.reuters.com/article/us-france-security-financing/france-steps-up-monitoring-of-cash-payments-to-fight-low-cost-terrorism-idUSKBN0ME14720150318

[kryptqnick]

Allegedly four major banks are complicit in $234 billion dolllars laundered for suspect russians.

Guilty parties would appear to be JP Morgan, Bank of America, Deutsch Bank and Citigroup.

Post the above link the next time someone complains about crypto currencies being used to "launder" money.  

It's terrible that such things are done by banks, but IMO it's really good for cryptocurrencies, because it's banks who usually pretend to be so damn serious about preventing money laundering and having enough confidence to neglect or even despise the crypto market. I hope this scandal will not be put aside, responsible people will get their punishment and others will rethink their views on cryptos. If someone sends thousands of bitcoins through exchanges, this person will probably be required to go through KYC procedure and might even get under investigation. When banks as centralized structures operate billions, people usually don't even notice, which makes money laundering even easier!

[eternalgloom]

It's pretty unbelievable that thhese banks have such huge amounts of leeway from the government.
I mean if you're caught doing any of this stuff as a regular citizen, you'll get caught in no time and the consequences will be pretty severe.

Yet these banks can just break the law willingly, without suffering any consequences for it.
Heck they're even bailed out by the government when they're going under due to their own mistakes.

I get that the government wants to prevent people's savings going up in smoke, but they should honestly just let them go down.

[LeGaulois]

Cryptocurrencies are used for money laundering,but the scale is 100 times smaller.
The strange thing is that nobody is pissed off, because of that big money laundering scheme.People think that this is something normal for the "too big to fail" banks.If some crypto exchange gets caught in money laundering,all the mainstream media will start crying about how "evil" cryptocurrencies are.

There are a few scandals in the banking industry, HSBC, BNP, are a few stories related to money laundering. The drama is popular for 3 months and then people move on.
I can think about Panama Papers, see how people moved on to the next and don't talk about it anymore.

[Reid]

Isn't it ironic that these respected institutions are the ones who are quick to throw shade at bitcoin and cryptocurrencies as a vehicle for fraud and money laundering yet they are also the ones conducting large-scale money laundering themselves? Actually, it's easier and more difficult to follow where the trails lead once the money is converted into cold, hard cash, and this wouldn't be possible if banks are not in for the job. If their connection with the money laundering scheme is proven, this would be another blunder indicating that even the banking system isn't safe from these types of illicit activities.

Bulls-eye.

Also, this is seen because there is a lot of money that is included.
How about those small money that they have been laundering? They could have been doing it weekly or worse everyday.

They should not just escape from this even if big names are attached to it. Those who are on authority should really make a big deal out of all this mess that they have done.

Bitcoin never fought back to their allegation to it. They are damaging their own. 

[magneto]

Exactly. I wouldn't have any doubt in my mind that big corporations have been dealing with laundered money on an institutional scale way more than what bitcoin or other cryptos are used for it.

Yet, you see that bitcoin is apparently scrutinised in many countries because of "AML concerns", and the press paints a bad picture regarding the association of bitcoin with these illegal activities.

The fact is that bitcoin itself is completely legitimate, there is nothing illegal about a cryptocurrency that is decentralised. What people use it for is a completely different matter, and can't just be attributed to bitcoin itself. It's like saying fiat currency needs to scrutinised because people are using it for laundering money as well, makes no sense.

[exstasie]

Allegedly four major banks are complicit in $234 billion dolllars laundered for suspect russians.

Guilty parties would appear to be JP Morgan, Bank of America, Deutsch Bank and Citigroup.

Post the above link the next time someone complains about crypto currencies being used to "launder" money.  

Russia may have used the laundered capital to circumvent sanctions imposed upon it by the EU. When banks provide this type of service for a country, they usually demand something in return in the form of political favors. This could allow them to gain leverage over leaders like Putin who would normally be more independent from banking systems.

I'm hesitant to speculate too much about the Russian geopolitical angle. Laundering $234 billion sounds lucrative enough to justify the involvement of the correspondent banks. Nobody should ever be surprised that banks engage in money laundering schemes, unwittingly or not. When you're rolling in profits, you look the other way. They're only being rational. 

I do wonder, how exactly are correspondent banks supposed to "know their customers' customers?"

[shield132]

Haha, after reading this it seems funny when people talk about bitcoin laundering and it's related problems. Well, without doubt, bitcoin is great in this job but people think banks are clear. Deutche Bank has a lot of shady partners too, I mean small banks and banks in small countries. Emoyees were warning, owners hang on, it's a realized crime, how will these banks be affectes? It won't follow any action and that's all, it's a shame.

[HeRetiK]

There are a few scandals in the banking industry, HSBC, BNP, are a few stories related to money laundering. The drama is popular for 3 months and then people move on.
I can think about Panama Papers, see how people moved on to the next and don't talk about it anymore.

3 months? 3 days maybe, if they even care in the first place. To make matters worse, people have died for nothing over this shit [1].

[1] https://www.theguardian.com/world/2017/oct/16/malta-car-bomb-kills-panama-papers-journalist

[Cosbycoin]

Money laundering is a multi-bank phenomenon. Danske Bank Estonia has been revealed as the hub of a $234bn money laundering scheme involving Russian and Eastern European customers. But Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve's electronic settlement system. Big banks, in other words.

The entrance to Danske Bank's headquarter at Holmens Kanal in Copenhagen, Denmark. Danske Bank admits that it has been used to launder money from companies related to Russia. Transactions valued at $234 billion flowed through its small branch in Estonia between 2007 and 2015, a large part of which are believed to have been illicit. (Photo by Ole Jensen/Getty Images)

It appears that four big banks helped Danske Bank Estonia make its dodgy transactions. J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia. But how much responsibility do these banks bear for these transfers? Could they reasonably have been expected to know – or suspect - that the money was dirty?

Banks that make transactions on behalf of other banks are known as “correspondent banks”. In the past, correspondent banks often had little information about the originator or final recipient of the money they were transmitting. They simply trusted that their customer bank was acting legally and that its customers were above board. Old habits die very hard: in 2016, the correspondent banks involved in the FIFA corruption case, which include Citigroup, HSBC, Wells Fargo and Barclays, all claimed that they could not have known that the transfers were corrupt.

But these days, banks are expected to “know their customers’ customers”. They are supposed to conduct their own checks to make sure that they are not unwittingly being used to launder dirty money.

In the case of Danske Bank Estonia, one of the correspondent banks did suspect something was wrong. In 2013, J.P. Morgan terminated its correspondent banking relationship with Danske Bank Estonia because it was concerned that it was being used as a conduit for dodgy funds. Deutsche Bank, however, blithely continued to make U.S. dollar wire transfers on behalf of the Estonia branch’s non-resident customers after J.P. Morgan's departure. So did Bank of America, which replaced J.P. Morgan.

From 2014 onward, according to Bloomberg, Deutsche Bank started refusing to make transfers that looked particularly dodgy. But the transaction flow did not fall off dramatically until 2015, when Bank of America and Deutsche Bank both terminated their correspondent bank relationships with Danske Bank Estonia - Bank of America in May, and Deutsche Bank in September. A report from the Danish Financial Supervisory Authority (FSA) – Danske Bank’s regulator – says that an employee at one of these banks warned about the Estonian branch’s suspicious customers:

In that connection, a senior employee from the correspondent bank in question assessed that out of ten non-resident customers from the Estonian branch, the correspondent bank would be comfortable only with servicing one given the customers’ characteristics. The employee also warned Danske Bank against Moldovan customers and customers transferring money to Moldova.

According to the Financial Times, this was a Deutsche Bank employee.

But if Deutsche Bank employees were so aware of the suspicious nature of Danske Bank Estonia’s customers and the dodgy nature of some of the money flows, why didn't Deutsche Bank follow J.P. Morgan's example in 2013? Why was it the last to terminate its correspondent bank relationship?

At that time, Deutsche Bank was happily doing a spot of Russian money laundering itself – the “mirror trades” through its Moscow branch for which it last year paid fines totaling $630m to U.S. and U.K. regulators. I suppose it is entirely understandable that a bank that was actively laundering money for its own customers might be little concerned about money laundering by one of its customer banks. But this raises serious concerns about the adequacy of Deutsche Bank's AML processes - concerns that, as we shall see, refuse to go away.

The U.S. regulators are already sniffing round Danske Bank. If the FIFA investigation is anything to go by, their interest will not be limited to the Danish bank. They will also want to know what the correspondent banks thought they were doing. Deutsche Bank was the only correspondent bank to stay with Danske Bank Estonia throughout the period of its known money laundering, and it apparently continued the relationship despite knowing that the Estonian branch’s customers and transactions were suspicious. U.S. regulators might take a dim view of Deutsche’s behavior, especially given the $41m fine it was handed by the Federal Reserve in May 2017 for inadequate AML controls, and the “Problem Bank” designation awarded to its American subsidiary by FDIC.

It seems that BaFIN, the German regulator, thinks so too. Two days after Danske Bank released a report revealing the mammoth scale of its Estonian branch’s money laundering activities, BaFIN reprimanded Deutsche Bank for inadequate AML processes, and imposed an external supervisor to ensure it improved them. The notice on BaFIN’s website is short and to the point:

On 21 September 2018, in order to prevent money laundering and terrorist financing, BaFin ordered that Deutsche Bank AG take appropriate internal safeguards and comply with general due diligence obligations. The issued order is based on section 51 (2) sentence 1 of the German Money Laundering Act (Geldwäschegesetz – GwG).

To monitor the implementation of the ordered measures, BaFin has appointed a special representative in accordance with section 45c (1) in conjunction with section 45c (2) no. 6 of the German Banking Act(Kreditwesengesetz – KWG). The special representative is to report on and assess the progress of the implementation.

Ostensibly, this follows on from Deutsche Bank’s admission in August 2018 that its AML processes were patchy to say the least. But the timing is exquisite. Could BaFIN be warning off the U.S. regulators? “This baby is ours. We will deal with it.”

Whether or not BaFIN’s reprimand is directly connected with the money laundering revelations, the fact remains that Deutsche Bank has some serious questions to answer regarding its conduct during the period of its correspondent relationship with Danske Bank Estonia.

And so too do the other banks involved. Although their correspondent relationships were of shorter duration, both J.P. Morgan and Bank of America helped to facilitate the enormous dollar flows in and out of Danske Bank Estonia. And although the exact role of Citigroup’s Moscow branch is as yet unclear, the little we know about it sounds suspiciously like Deutsche Bank’s “mirror trades”.

Investigations into the Estonian money laundering scandal are only just beginning. There is much, much more still to be uncovered. But already, an all-too-familiar familiar name has emerged. Funny, isn’t it, how whenever there is some shady activity going on, Deutsche Bank is never far away?

https://www.forbes.com/sites/francescoppola/2018/09/30/the-banks-that-helped-danske-bank-estonia-launder-russian-money/

....

Allegedly four major banks are complicit in $234 billion dolllars laundered for suspect russians.

Guilty parties would appear to be JP Morgan, Bank of America, Deutsch Bank and Citigroup.

Post the above link the next time someone complains about crypto currencies being used to "launder" money.  

Russia may have used the laundered capital to circumvent sanctions imposed upon it by the EU. When banks provide this type of service for a country, they usually demand something in return in the form of political favors. This could allow them to gain leverage over leaders like Putin who would normally be more independent from banking systems.

This could have many far reaching implications(that will go neglected and unsaid), tbh I'm no expert.

edit: Fixed the source link.

J.P Morgan again on the news for some fraudulent activities. Hypocrites! I think it is high time people started knowing that the same set of people that call this space a scam, being used for fraudulent activities are actually the main culprits themselves even in the real fiat based world.

It is just funny that in the next few years, all this would become a thing of the past, everyone will forget about it, and then they keep doing whatever they like and at the end, have the guts to even come condemn another form of currency publicly. They have no shame at all, and most especially for JP Morgan.

[CryptoAssasin]

These well known banks are the biggest scammers all over the world. Using the people's money without their knowledge for their own interest and make us their slaves. They are afraid with cryptocurrency taking them over in terms of financial controls and return of investment, thats why they are super desperate to use their power to take down cryptocurrency and make it a scam in the eye of those investors. Fortunately, there are well known whales in the market who believed in the potential of crypto and we are all one of them who believed in cryptocurrency.