Deutsche Bank is under scrutiny over allegations employees in its Estonia branch facilitated money laundering of billions of dollars (RAIGO PAJULA)

Copenhagen (AFP) – Denmark’s largest lender Danske Bank said Tuesday it would follow the Estonian banking watchdog FSA’s order to shut its Estonian branch within eight months, after a money laundering scandal.

The bank also announced it was closing its operations in Latvia, Lithuania and Russia. 

Investigators in Copenhagen, Brussels, London and the United States are probing some 200 billion euros ($226 billion) in transfers that passed through the Estonian branch between 2007 and 2015, involving some 15,000 foreign clients.

Last December, Estonian authorities detained 10 former Danske employees on suspicion they had facilitated money laundering via non-resident clients, including many Russians.

“We have every right to put an end once and for all to this very exceptional and unfortunate case,” the head of the Estonian FSA (Financial Supervision Authority), Kilvar Kessler, said in a statement Tuesday.

The FSA gave Danske 20 days to submit an action plan for closing the branch. 

On Monday, the European Banking Authority announced it was opening a formal investigation into a possible breach of EU laws by the FSA and its Danish counterpart Finanstilsynet over the case.

Kessler said the scandal had “dealt a serious blow to the transparency, credibility and reputation of the Estonian financial market, while the supervisory authority of the home country has handled the bank softly.”

Last November, Danish prosecutors brought preliminary charges against Danske for violating money-laundering laws between February 2007 and January 2016.

Danske has acknowledged that much of the money that went through the branch during that period may need to be treated as suspicious in origin.

“We acknowledge that the serious case of possible money laundering in Estonia has had a negative impact on Estonian society, and we acknowledge that the Estonian FSA, against this background, finds it best that Danske Bank discontinues its Estonian banking activities,” Danske Bank’s interim chief executive Jesper Nielsen said in a statement Tuesday.

“We will close down our remaining activities as requested. We will continue our cooperation with the Estonian and other relevant authorities,” he added.

At the end of 2018, the Estonian branch had around 14,700 depositors in Estonia and 12,300 borrowers.

Estonia’s central bank said Tuesday the shutdown would have little effect on the Estonian economy as Danske had stopped providing services to private individuals in 2015.

In April 2018, Danske announced it had stopped opening new accounts for local businesses in the Baltic States.

Danske also said Tuesday it had “for some time” weighed the future of its activities in Latvia, Lithuania and Russia.

“Danske Bank has now decided to close down all of these activities,” a move “fully in keeping” with its strategy of focusing on its Nordic core markets, Nielsen said.

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