What's going on?
The CEO of Danske Bank (which literally translates to “Danish Bank”) resigned on Wednesday amidst a money laundering scandal – and the bank’s stock withdrew, falling by 4%.
What does this mean?
The authorities are investigating payments through Danske’s Estonian arm after the bank published results of its own year-long investigation into the matter. Danske said the money in question totals around $234 billion – approximately nine times the size of Estonia’s economy – and that many of the payments were fishy. The people conducting these transactions in Estonia included folks from Russia and Ukraine.
Both Estonian and Danish regulators are investigating, and Denmark’s said it’ll tighten its money laundering laws. The US hasn’t gotten involved yet but if it does, and Danske’s found at fault, it’ll likely hit the Danish bank with some fines. Deutsche Bank was fined $630 million last year for its involvement in a Russian money laundering scheme, and ING Group recently agreed to pay $900 million to settle a money laundering case.
Why should I care?
For markets: Nice utopia, Scandinavia.
This decline in Danske’s share price brings its 2018 fall to 31% – investors are likely wary of a potential impending fine of unknown amount. The Danish bank also lowered its expectations for how much profit it’ll make this year, as it’ll have to spend on investigating this further – another red flag for investors and potential reason to take their money and run.
The bigger picture: Money launderers don’t discriminate.
Cryptocurrencies have taken a lot of the flak when it comes to money laundering. The digital currencies – bitcoin being the biggest – operate on the internet, and don’t exactly require you to provide your passport and proof of address. But Danske’s slip-up, along with Deutsche, ING, and Credit Suisse (which is in trouble over its anti-money laundering obligations), shows that the traditional banking sector is far from immune to money laundering.