Last Stop for Some of Danske Bank’s Dirty Money: Spanish Real Estate

(Bloomberg) -- Some of the $230 million at the heart of Europe’s widening money-laundering scandal was ultimately spent on Spanish real estate, according to anti-corruption prosecutors in Madrid.

Their investigation following a trail that originated in Russia broadens an inquiry that so far has concentrated on the Baltic states and Scandinavian banks including Danske Bank A/S and Swedbank AB. The Spanish probe alleges that a money-laundering ring moved about 35 million euros ($39 million) through accounts in Moldova, Ukraine and Lithuania and then via Estonia to Spain, providing new details about the final destination of some of the cash.

The funds “have been laundered since 2008 through an international structure of companies, banks and countries that have little-to-no transparency nor financial or procedural collaboration,” Spanish state prosecutors Juan Jose Rosa Alvarez and Jose Grinda Gonzalez wrote in the complaint, which was filed in a court in Madrid on Tuesday.

Judges at Spain’s National Court must now decide whether to continue investigating the case and then whether to proceed to trial. An investigating judge must also rule whether the individuals and institutions named in the complaint should be considered witnesses or defendants.

Spanish authorities join counterparts in Europe and the U.S. who are drilling into what has come to be known as the "Magnitsky money." Investor William Browder has led the charge, galvanized by the jailing and subsequent death of his Russian tax lawyer Sergei Magnitsky, who was trying to expose the $230 million fraud.

While the illicit transfers under investigation in many cases originated as long as a decade ago, the revelations have raised new worries about the effectiveness of Europe’s patchwork of anti-money laundering regulation and enforcement. Bloomberg Economics estimates about $1 trillion moved out of Russia in the past 25 years. Danske Bank admitted in September that most of $230 billion that flowed through its Estonian unit was probably suspicious.

Spending

About 10 million euros of the 35 million euros under investigation in Spain was transferred from Danske Bank’s Estonian unit to 65 recipients, mainly individuals of Russian and ex-Soviet Union origin, prosecutors allege, to then purchase real estate in Spain. An additional 7.2 million euros went to buy car parts, construction equipment, shoes and other goods, according to the filing.

The two prosecutors said about 12.7 million euros was transferred between April 2008 and October 2009 from an account linked to the Russian treasury to an individual’s account at Caixa de Girona, a small regional savings bank that was merged with CaixaBank SA in 2010.

Prosecutors also allege that between March 2008 and December 2009, a company based in the British Virgin Islands transferred 5.1 million euros to an account under its owner’s name at another Spanish bank. The transfer was earmarked for a "loan to buy real estate property."

The court documents also provide additional context to the brief detention of Browder in Madrid in May 2018. At the time, Spanish police said they held him because they were acting on a Russian arrest warrant, which was later found to be "invalid."

Court documents confirm that Browder was in Madrid at the time to provide testimony to Spanish prosecutors about the Magnitsky money’s Spain connection.

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