12 Danske Bank officials involved in money laundering scandal

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Photo: Tairo Lutter

Bill Browder, championing the rights of the lawyer Sergei Magnitski, killed in Russia, has submitted a new appeal to the Estonian prosecutor’s office, asking to launch a criminal investigation of 26 officials of the Estonian branch of Danske Bank, who allegedly enabled the laundering of billions of dollars worth of dirty money through the bank.

“According to existing information, there was an at least 26-member group of Estonian staff of Danske Bank headed by Aivar Rehe, who were motivated by personal profit. Their activities amounted to creating opportunities for large-scale money laundering, contributing to it and hiding the activities. The activities involved at least 190 bank accounts and the volume of transactions through 21 of them exceeded nine billion dollars,” reads the plea addressed to Prosecutor General Lavly Perling and the Financial Intelligence Unit.

According to the plea, every member of the group, described as a criminal association, performed a clearly defined role from approving the scheme to the opening of accounts for shell corporations and approving of transactions. “The members either were aware of the criminal origin of the money or possessed sufficient information to suspect it, but they did not acknowledge the information nor passed it on,” the plea reads. According to the document, the profit of the members of the group consisted of earning their salary and “other compensation”.

The plea signed by Browder and officially submitted by Hermitage Capital Management owned by him, is a direct response to an earlier decision of the Estonian prosecutor general’s office to close the investigation of the so-called Magnitski money laundering cases.

Browder told Postimees some weeks ago that the Estonian Branch of Danske had been involved in the largest money laundering case in Europe yet the investigating authorities did nothing to stop it. “They were initially efficient in gathering information, but terrible in acting upon it,” he said.

The plea estimates the amount of money laundered via Danske Bank as nine billion dollars (approximately 7.7 billion euros). Hermitage is directly affected to the tune of 230 million dollars regarding which the company describes itself as the injured party. This amount is part of the sum stolen in Russia by taking over by force of enterprises belonging to Hermitage and by claiming tax rebates from the state using forged documents.

Browder, who was one of the largest and most successful foreign investors in Russia in the early 2000s, hired the lawyer Sergei Magnitski (1972-2009) to investigate the scheme, but the latter was arrested during it and allegedly beaten to death in prison.

Former top officials decline from answering

Investigations of money laundering concerning Hermitage and the so-called Laundromat case have so far bogged down in Estonia. The Prosecutor General’s office and the investigating Financial Intelligence Unit have explained with the complexity of the investigation, the need to prove the criminal intent or to show the actual origin of the money, the possible expiry of the crimes and the fact that official monitoring of foreign-owned banks operating in Estonia is carried out by institutions of different countries.

The detailed 21-page plea submitted on July 20 claims, however, that a new investigation could be carried out quickly and effectively, since a large body of evidence has already been gathered during earlier procedures and with the help of international cooperation, where the Estonian prosecutor’s office has supported its French and American colleagues engaged in similar procedures.

“The Estonian authorities also have a legal foundation for continuing the investigation, since at least some members of the criminal association are Estonian citizens and the others – Russian citizens – were hired via the Estonian branch of Danske Bank,” toe plea reads. It also points out substantial public interest in the affair, since money laundering through Estonia harms the reputation of Estonian as well as European banking and the same case involved the killing of 37-year-old Sergei Magnitski, who left behind his wife and two children.

Besides Aivar Rehe, the long.-time CEO of Danske branch, the plea lists among the most important figures the bank’s then CFO Ivar Pae, member of the board Tõnu Vanajuur, personnel manager Liina Oks and corporate banking manager Marek Začek.

“This is a real surprise for me, I am truly amazed,” said the veteran personnel manager Liina Oks. “Maybe I have been included in the list because of my position, but I had no knowledge of money laundering. I did not meet the clients, I knew information about the staff, certainly not about the clients,” she said.

Oks admitted that she was nevertheless informed about more detailed background checks. “I know that monitoring was going on and there were procedures, but I was not aware of clients or transactions. Nobody needed my permission or veto.”

Postimees managed to contact Rehe on phone, but he claimed to be too busy to talk. He asked to be called back, but did not pick up the phone. Začek did not respond to the daily’s request to call back.

As for the remaining 21 individuals in the list, the plea claims that they had been directly connected with the opening of bank accounts used in the money laundering scheme and the administration of transactions via the accounts.

Erik Lidmets, a former official of the bank, is one of those accused of the latter activity. “I joked until this day that I must be one of the last ones not to be contacted so far,” he said.

Lidmets initially worked as a simple account handler, but rose to the post of the head of the department handling the accounts. He resigned from the bank in 2010 and is now an entrepreneur.

“The job of the client manager was making contacts, finding new clients and checking whether their activities met the current regulations,” Lidmets said, adding repeatedly that the rules were much more relaxed ten years ago.

What was forbidden then, or was everything allowed?

“Generally, yes,” Lidmets answered and explained that stricter monitoring concerned deals with weapons and obviously transactions of politicians and persons close to them. Large transfers by newly established firms happened and did not ring any bells.

The accounts manager was the initial official to monitor transactions, but the chain of inspectors was long, according to him.

“The accounts manager is the lowest-level official who is immediately working with the client. The whole framework is established above his level. Our activities were directed by the management. Large clients were also brought in from above,” Lidmets said.

 “Moreover, accepting new clients was not decided by the account manager but we had a committee, which included the top managers, a liaison officer of the Financial Intelligence Unit and the risks manager,” he continued.

The concern was aware of the affair

Lidmets claims to remember transfers of hundreds of millions, but said that these had been verified by hundreds of pages of documents.

“It was all closely examined so that the client came with a briefcase full of confidential documents and showed them to us,” Lidmets said. There were suspicions, according to him, which led to informing the risks manager and sometimes the Financial Intelligence Unit.

Lidmets would blame the relaxed regulations of the day, which permitted the transit of shady money. He denies any conspiracy.

“We are aware of the claims of Hermitage Capital Management and the fact that they submitted similar claims to the Danish police in 2013. These were rejected due to expiry,” Danske Bank Group PR manager Kenni Leth commented. “We are waiting for the response of the police and continue with the internal inquiry concerning the Estonian case,” he added.

Kaarel Kallas, spokesman of the Prosecutor General’s office, assured that the office had received the report of crime and that particular interest is paid to the prevention of money laundering. A criminal procedure would be launched if and when the evidence of crime should be detected. The Prosecutor General’s office has not started it earlier.

“In order to present charges in money laundering, it is necessary to prove that the money was earned as a result of crime. If the crime preceding possible money laundering had been committed a long time ago in foreign countries and by foreign citizens and the possible legal entity perpetrator has ceased to operate, it is complicated to collect evidence about the possible initial crime to present charges and the process may end with a stalemate,” Kallas said.