Widening Russia Money Laundering Scandal Hits European Banks

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More European banks are being drawn into money-laundering allegations centered on dirty Russian money, adding to the scandal in an industry still recovering from the financial crisis.

Initially centered on Danske Bank A/S in Denmark and Sweden’s Swedbank AB, allegations of suspicious transfers widened this week to include Raiffeisen Bank International AG in Austria and several Dutch institutions. Danske has lost half its market value since admitting its role in a money laundering scandal in 2016.

Widening Russia Money Laundering Scandal Hits European Banks

The disclosures describe a network of banking relationships that was used to export funds from criminals in the former Soviet Union to western nations, often via Estonia and Lithuania. Investigations are under way in the Baltic nations, the U.S., the U.K. and the Nordic countries, but almost daily revelations suggest there are more surprises to come on the scale of the misconduct.

Raiffeisen Bank International AG led declines in European banking shares on Tuesday -- slumping as much as 15 percent -- after Bill Browder’s Hermitage Fund said the bank ignored warning signs that would have helped stop the laundering of funds from Russian criminal activity. Dutch banks fell after a report that the three largest were used to move cash from Russia.

Widening Russia Money Laundering Scandal Hits European Banks

The fresh allegations are based on files obtained by the Organized Crime and Corruption Reporting Project, or OCCRP, and 15min.lt, a Lithuanian website. They were reported by a number of participating media outlets and nicknamed Troika Laundromat because many of the shell companies involved in the transactions allegedly had ties to Troika Dialog, a Russian investment bank that was bought by state-owned Sberbank PJSC in 2012.

Troika Dialog “acted in full compliance with the highest international standards of transparency and financial reporting” throughout its history, said the press office of Ruben Vardanyan, who led the firm for about two decades.

The Troika Laundromat is the fourth scheme the group has uncovered, the others being the Proxy Platform, the Russian Laundromat, and the Azerbaijani Laundromat. The Guardian reported that the latest documents show an estimated $4.6 billion was sent to Europe and the U.S. from a Russian-operated network of 70 offshore companies with Lithuanian accounts. The paper said there’s no suggestion that the end recipients of funds were aware of the source of the money. It’s not clear what share of the transfers was illegitimate.

Still, the new revelations and prior reports paint a picture of Nordic banks that, often via their Baltic units, became hubs for Russian criminals who channeled funds to the West. Nordea Bank Abp allegedly handled about 700 million euros ($793 million) in potentially dirty money, some of it linked to the death of Russian lawyer Sergei Magnitsky, according to Finnish broadcaster YLE on Monday.

Widening Russia Money Laundering Scandal Hits European Banks

Nordea Chief Risk Officer Julie Galbo said in an interview late on Monday that much of the allegations were already known publicly and the bank was trying to establish whether any were new. Any suspicious behavior would be reported to the authorities, she said.

Accounts at the three largest Dutch banks were used by the Troika Laundromat to move cash from Russia, according to Dutch magazine De Groene Amsterdammer. About 43 million euros were paid to the Rabobank account of Dutch yacht builder Heesen for construction of two boats, the newspaper said, while approximately 190 million euros went through bank accounts at an ABN Amro unit that later became part of Royal Bank of Scotland.

ABN, RBS

All assets, data and clients of the unit became the legal responsibility of RBS in February 2008, according to an ABN Amro spokesman. Though it has the same name, the current ABN Amro is a completely different legal entity than the one that sold the unit to RBS, the spokesman said.

ING Groep NV also fell in Tuesday trading after the newspaper said an ING branch in Moscow kept working until 2013 with a client who it suspected of involvement in money laundering. ING last year agreed to pay a record fine to settle charges related to failures in anti money-laundering checks.

Officials for Rabobank and ING declined to comment.

In Austria, Raiffeisen Bank International’s predecessor “ignored suspicions” that should have triggered reports to the authorities, thereby abetting the money laundering linked to the Magnitsky case, Hermitage said. The filing lists payments totaling $634 million that went from accounts at Lithuania’s Ukio Bankas and Danske Bank’s Estonian unit to accounts at Raiffeisen Zentralbank Oesterreich AG, then the main owner of Raiffeisen Bank International. The bank said it’s started an investigation into the matter.

Browder, an investor who has spent the past decade building cases against banks for laundering following the death in a Russian jail of Magnitsky, said more allegations will unfold.

A spokeswoman pointed to past allegations by Hermitage that had been found by authorities to be baseless. A probe of RZB by Austrian financial regulators in 2010 found no evidence that the firm was involved in money laundering.

Browder said by telephone that the new filing contains information that wasn’t available then.

More than $889 million went from accounts at Deutsche Bank to accounts of the Troika Laundromat between 2003 and 2017, German daily Süddeutsche Zeitung reported. Deutsche Bank, in written comments, said it always cooperates with authorities and regulators worldwide and that as a correspondent bank it only has limited access to information about the customers of the respondent bank.

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