Corrected: EU banking watchdog ends investigation into Estonian, Danish regulators over Danske Bank

(Makes clear EBA proposed a breach of law recommendation but overruled by its supervisory board) By Jacob Gronholt-Pedersen COPENHAGEN (Reuters) - The European Union banking watchdog said on Wednesday it had concluded its investigation into financial regulators in Estonia and Denmark in relation to suspected money laundering activities by Danske Bank. Danish and Estonian financial regulators have publicly blamed each other for the Danske Bank money laundering scandal, after Denmark's largest bank last year admitted that 200 billion euros ($226 billion) of suspicious transactions flowed through its Estonian branch between 2007 and 2015. The European Banking Authority (EBA) said its investigation was closed without issuing a recommendation

Reuters April 18, 2019 00:08:12 IST
Corrected: EU banking watchdog ends investigation into Estonian, Danish regulators over Danske Bank

Corrected EU banking watchdog ends investigation into Estonian Danish regulators over Danske Bank

(Makes clear EBA proposed a breach of law recommendation but overruled by its supervisory board)

By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) - The European Union banking watchdog said on Wednesday it had concluded its investigation into financial regulators in Estonia and Denmark in relation to suspected money laundering activities by Danske Bank.

Danish and Estonian financial regulators have publicly blamed each other for the Danske Bank money laundering scandal, after Denmark's largest bank last year admitted that 200 billion euros ($226 billion) of suspicious transactions flowed through its Estonian branch between 2007 and 2015.

The European Banking Authority (EBA) said its investigation was closed without issuing a recommendation. It had opened the probe in February to investigate a possible breach of EU law by the two regulators.

"At a vote at its meeting on 16 April 2019 the EBA's Board of Supervisors rejected a proposal for a breach of Union law recommendation," it added.

The board of supervisors is the EBA's main decision-making body and is composed of the banking authorities of the 28 EU member states.

The Director General of the Danish FSA Jesper Berg said he was satisfied with the EBA's decision and was strengthening efforts to curb money laundering and financial crime.

The Estonian FSA also said it would continue its fight against money laundering.

The Danske scandal has reinforced calls by EU lawmakers for stronger European oversight of the union's banking sector and tighter scrutiny of the often close relationships between regulators and the banks they oversee.

"Even if no laws were formally breached, this still leaves unanswered whether regulators lived up to their responsibility and reacted to any suspicions," said Jeppe Kofod, a Dane who heads the European Parliament's Special Committee on Tax Crimes, Tax Evasion and Tax Avoidance.

"Authorities have not been active enough in halting the flows regardless of legislation," he told Reuters.

The EU Commission pledged to assess the situation and how relevant rules have been applied.

Danish lawmakers have increased penalties for money laundering eight-fold, and the government says it plans to create a "more aggressive financial regulator".

Adding to the pressure on European lawmakers is an investigation into Swedish lender Swedbank by Swedish and Baltic financial watchdogs after broadcaster SVT reported it processed gross transactions worth up to 20 billion euros ($22.6 billion) a year from high-risk, non-resident clients, mostly Russians, through its Estonian branch between 2010 and 2016.

Bill Browder, an investor who campaigns to expose corruption, has taken a criminal complaint against Swedbank to Latvian authorities, alleging it was involved in a Russian money laundering scandal.

($1 = 0.8840 euros)

(Reporting by Jacob Gronholt-Pedersen, additional reporting by Francesco Guarascio in Brussels, editing by Louise Heavens and Alexandra Hudson)

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