Niall Hearty, of financial crime specialists Rahman Ravelli, emphasises the need for companies to ensure their anti-money laundering procedures are fit for purpose.
Six people have now been charged with laundering billions at Danske Bank's scandal-hit branch in Estonia. According to the Estonia prosecutor, the six charged are former Danske Bank employees who worked in the foreign banking unit at its branch in the Estonian capital, Tallinn. The five men and one woman are accused of orchestrating large-scale money laundering at the branch from 2007 to 2015.
Evidence gathered in pre-trial proceedings found that defendants provided money laundering services relating to at least US $1.6 billion US dollars and 6 million euros.
Danske Bank's tiny Tallinn branch became the focus of a huge financial scandal when it was discovered that suspicious payments totalling approximately 200 billion euros had flowed through it. The Estonian government ordered that the branch be closed in 2019.
Estonia's prosecutor has accused the six who have been charged of creating a money laundering operation that was hidden from other units of the bank. This operation involved advising clients on how to hide an electronic bank transfer trail and helping them prepare documents and buy companies to disguise the real owners of funds.
Danske Bank, which is Denmark's biggest lender, pleaded guilty to bank fraud conspiracy in December, and forfeited $2 billion as part of an agreement with the United States and Denmark. But the bank is still subject to a criminal investigation in France and faces several civil litigation claims relating to its activities in Estonia.
Reminder
The case has been in the headlines for many years. The scale of the alleged money laundering and the fact that it was being conducted in a small branch of one of Europe's biggest banks made it particularly newsworthy.
But Danske Bank's problems in Tallinn can also be viewed as a reminder of the importance of companies being aware of the threat posed by money laundering – and the need to have procedures in place to identify and prevent it.
Money laundering is the disguising of the origins of the proceeds of crime – the "cleaning'' of wealth that has been obtained from illegal activity. It can be committed by someone with their own proceeds or by someone handling someone else's proceeds. Money laundering schemes can differ in their complexity. They may involve varying numbers of individuals or chains of companies and may be based in just one country or be cross-border and use a network of offshore accounts.
If we take the UK as an example, the Crown Prosecution Service (CPS) views money laundering as involving one of three processes:
- Placement - the process of placing money gained through criminal activity into the financial system.
- Layering – the movement of such money in the financial system through complex webs of transactions.
- Integration - the process by which that money is absorbed into the economy through activities such as investment in real estate.
Prevention
Whatever business sector or country a company or organisation functions in, taking steps to prevent money laundering is essential.
Money laundering is an area that has seen increasing obligations placed on those in business. The UK has one of the toughest anti-money laundering regimes in the world, while the European Union has produced a number of directives aimed at preventing money laundering. These obligations that are placed on corporates and individuals in business and finance cannot be ignored. They have to be met – and any allegations of failing to meet them have to be responded to in the right way.
In its simplest terms, meeting these obligations involves:
- Assessing the risk of money laundering in the workplace
- Introducing the most appropriate measures to identify and / or prevent it
- Making sure those measures are properly enforced
- Reviewing the effectiveness of such measures and revising them when it is necessary to do so
A failure to take such steps will make any organisation more vulnerable to money laundering. It will also leave it with less scope for challenging allegations that it was involved in money laundering if and when the authorities start investigating. This will be the case wherever an investigation is carried out.
Money laundering should not be viewed as a problem that is limited to certain countries – or even certain sectors of business. With an increasing number of nations now taking a tougher stance on money laundering, companies need to act to ensure they have proper, well thought-out procedures in place to ensure they are doing all they can to prevent themselves becoming involved in it. Even if money laundering does still happen, the company will have a strong defence if it can demonstrate that it did everything possible to prevent it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
