Money laundering: why the Danske scandal has no consequences for supervisors

It is one of the biggest money laundering scandals in the world, even though it happened in a small EU country. And it had no consequences for supervisors: from 2007 to 2015, the Estonian branch of Danske Bank, the largest Danish bank, processed € 200 billion in payments without adequate checks. Many of those transfers came from suspicious sources in Russia and other Eastern European countries, an investigation later revealed. Supervision of the institute was the responsibility of the Estonian and Danish financial regulators. The European Banking Authority (EBA) in Paris, an EU body, opened proceedings in 2019 to check whether the two national authorities had not complied with EU requirements. Two months later, however, that investigation was dropped after a vote in the EBA board. Experts had recommended to the authority that the board of directors find a breach of EU law.

Interestingly, representatives of the national supervisory authorities sit in this supreme decision-making body, for Germany, for example, Raimund Röseler, who is in charge of banking supervision at the Federal Financial Supervisory Authority (Bafin) in Frankfurt. The stopping of the procedure has been strongly criticized by MEPs, but the EBA has long refused to say who exactly voted for and against this move. In the meantime, however, the Parisians have published the result – and it is explosive.

Only France voted to find a violation of the law. Twelve representatives abstained, including the German, 13 voted against the diagnosis of violation of the law – including the Danish and Estonian representatives. Thus, those concerned voted and were unsurprisingly in favor of an acquittal.

CSU MEP Markus Ferber says supervisors apparently acted “on the principle: one crow doesn’t sting another eye.” The spokesperson for the Christian-Democratic parliamentary group PPE called the fact that Germany also abstained “shocking”. If SPD Finance Minister Olaf Scholz’s envoy “can only bring himself to abstain in one of the biggest money laundering cases in EU history, it is a sign of poverty, “complains Ferber.

Now it’s supposed to be run by EU oversight

After all, the supervision of anti-money laundering in Europe is about to change: this summer, the European Commission proposed to create its own supervisory authority at European level because the Commission disapproves of the quality differences between national supervisors. This new facility, which could be operational in 2023, will directly monitor certain large risky financial groups – including on-site inspections and the right to impose fines. National supervisors should remain responsible for other financial institutions. The EU authority will coordinate and monitor their work. If it turns out that a state supervisor of a bank is not doing well enough, the EU institution can take up the matter directly. If this possibility had already existed in 2007, the EU might have saved itself some trouble.

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