Article: Newly Obtained Audit Report Details How Shady Clients from Around the World Moved Billions Through Estonia

Billions of dollars in dirty money flowed through Danske Bank’s branch in Estonia, an explosive 2014 audit revealed. The original report had never been made public, until now.

Key Findings

  • The audit report provides an inside look at tactics used to move money around the world without accounting for it — and shows how Danske turned a blind eye to them.
  • Danske’s foreign clients frequently transferred huge sums around the world with only the vaguest of explanations.
  • Bankers accepted documentation in languages they did not speak and failed to query absurd contracts, including one for a shipment of paint jars worth $1,000 each.
  • Other clients listed addresses that did not exist, claimed to be sending massive quantities of goods to the middle of nowhere, and lent each other money on unclear pretexts.
  • When one group of clients aroused suspicion for making huge transfers, the bank suggested to them that they leave, to avoid having to report them to authorities.

On a warm Monday morning in June 2014, two auditors from Estonia’s financial regulator stepped into the Tallinn office of Danske Bank, armed with a single piece of graph paper handwritten with the names of 18 of its clients, and demanded to see their records.

At first glance, the customers on the list sounded boring. They were mostly obscure trading companies with generic names like Hilux Services and Polux Management. But the auditors — who had been tipped off by a police unit that tracks financial crime — didn’t have to dig too deep before things got very strange.

The companies were moving huge amounts of money through Danske Bank from Russia, Azerbaijan, and Ukraine, and justifying them with nonsensical contracts.

One company with no website or internet presence, started by a 21-year-old from Azerbaijan, received millions of dollars from Russian state arms company Rosoboronexport for no clear reason. Another company from Uzbekistan bought $2 million worth of “building materials” from the remote British Virgin Islands. A third company agreed to loan out $150 million, but inexplicably transferred $582 million instead.

After more than a month poring over Danske’s books, the auditors produced a damning report about the bank’s failure even to try to understand what its own clients were doing. But it was never made public, even after the goings-on at Danske Estonia sparked one of the biggest money laundering scandals of all time.

Credit: Ilmar Saabas/Ekspress Meedia

Kilvar Kessler, the head of Estonia’s financial regulator.

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