Nordea Gets Drawn Deeper Into Nordic Dirty Money Scandal

(Bloomberg) -- The biggest Nordic bank is the latest firm to be dragged deeper into the region's growing money laundering scandal.

Nordea Bank Abp allegedly handled about 700 million euros ($793 million) in questionable funds, some of which are linked to the death of Sergei Magnitsky, who ended his days in a Russian prison after revealing wide-spread corruption. The allegations were made in a report by Finnish broadcaster YLE on Monday, which cited leaked documents covering 2005 to 2017.

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A picture is forming of Nordic banks that, often via their Baltic units, became hubs for Russian criminals eager to channel their funds into the West. Danske Bank A/S is under investigation in the U.S. after admitting it was at the center of a $230 billion Estonian dirty money scandal. Swedbank AB, Sweden's oldest lender and the biggest Baltic financial group, last month became embroiled in the same case and is now being probed by the financial regulators in Sweden and Estonia.

“Until banks come clean and reveal the full extent of what suspicious transactions they have been involved in, this looks set to run and run,” said Philip Richards, an analyst at Bloomberg Intelligence in London.

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In an interview with YLE, Nordea Chief Executive Officer Casper von Koskull said his industry has been “naive” in its approach to dealing with money laundering. He said Nordea “takes the allegations seriously,” and also acknowledged that banks have in the past “underestimated” the complexity of how money launderers operate. In a separate statement, the bank also said that many of the allegations in Monday's report represented old claims that Nordea has already responded to.

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The allegations surrounding Nordea, which YLE reported together with Danish newspaper Berlingske, suggest that most of the suspicious money flowed through the bank's operations in Estonia, Denmark and Finland from Lithuania's now defunct Ukio Bankas. The report also points to the systematic use of shell companies. YLE said that it's not clear that all the transactions were necessarily illegal.

Nordea Chief Risk Officer Julie Galbo told Berlingske that the bank can't comment on specific transactions or client relations. However, she also told the newspaper that “things happened that shouldn't have happened.”

As word broke earlier in the day that YLE and Berlingske were preparing to release a report, Nordea shares fell as much as 6.5 percent. After investors saw that the amounts in question remain considerably smaller than those associated with the Danske scandal, the stock bounced back a little to end the trading day down about 3.5 percent.

The Nordea allegations are part of a larger investigation into several other banks, coordinated by the Organized Crime and Corruption Reporting Project. Called the Troika Laundromat, the project identified 76 so-called nodes created by employees of a private Russian investment bank to move about $8.8 billion for Russian businessmen close to the Kremlin.

Nordea, which moved its headquarters to Finland from Sweden for regulatory reasons last year, has already been fined in the past by Swedish authorities for failing to live up to anti-money laundering rules. The bank has repeatedly said it is cooperating with the relevant authorities.

Most recently, investor Bill Browder brought a complaint against Nordea alleging the bank is tied to the Danske scandal. Finland's prosecutor and police are looking into the case, and have yet to announce any decision on whether they think an investigation is warranted.

In an emailed comment, Browder said “I fear that this is the tip of a much bigger iceberg.”

Browder focused on Danske in trying to find out who benefited from the murder of Magnitsky, a lawyer who worked with the Hermitage Capital co-founder to uncover a Russian tax fraud case. Browder says he has evidence suggesting Nordic banks were an integral part of Russian money laundering and has warned that he has more evidence that will shed light on the case.

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net;Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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