In 2013 the Estonian branch of Danske Bank was told by a whistleblower something no law-abiding bank ever wants to hear. They had, for years been banking companies linked to the family of President Putin and others connected to the Russian intelligence service, the FSB. At the time it was thought that around $4 billion had been laundered, last week it was revealed that in fact $8.3 billion worth of possibly sanctioned wealth was channeled out of Russia through the bank.
What does this mean for Danske? The bank’s share price has fallen by 25% over the past year as investors become increasingly nervous that the bank will go the same way as the Latvian bank, ABLV. The Danish government also wants to collect any of the bank’s profits which came from the laundered money, something that will be costly and difficult to determine. The implications for the European Union are far more significant. Danske Bank is just one of many high-profile scandals that have exemplified strategic weaknesses in the EU’s anti-money laundering regime and more crucially its Russia sanctions program. The EU may be leading the way in creating new AML/CFT legislation but without proper enforcement and supervision that stretches across borders scandals such as this will continue to undermine the efforts of the Union.
Two companies have recently fallen foul of the US Foreign Corrupt Practices Act (FCPA). Credit Suisse was fined $30m by the SEC last week for breaching the FCPA, it was also fined an additional $47m by the Department of Justice (DoJ) for the same offense. The fine will settle a corruption probe which uncovered that the bank hired more than 100 individuals connected to foreign government officials in exchange for contracts. These “Princeling” hires occurred over a six-year period across the Asia-Pacific region and resulted in millions of dollars of government business for the bank.
The Credit Suisse fine came hot off the heels of Glencore being subpoenaed earlier in the week under the same act. Glencore’s crimes however, could be much more serious as they also include breaches of money laundering laws. The company stands accused of committing a range of financial crimes in Nigeria, the Democratic Republic of the Congo and Venezuela where it carries out mining operations. Glencore is also currently facing investigation by the UK’s Serious Fraud Office (SFO) for alleged dealings with Israeli billionaire, Dan Gertler. Little has been leaked from the subpoena to know what the DoJ will be specifically focusing on. If history teaches us anything however, it is that when the DoJ goes after a big fish using the FCPA, the fines can be considerable.
Last week, the US sanctioned three Nicaraguan nationals for their role in recent violence in the country. Back in April, protests erupted after the government tried to make changes to the country’s state pension system, since then at least 220 protestors have been killed and tensions remain high. The sanctions issued last week are the first issued by the US on the country since it lifted its embargo in 1990. The US will hope that these sanctions will send a stern warning to Nicaragua’s controlling elites that their actions will no longer be tolerated. Their warning however, may not be heeded.
Afterall, the US has placed a succession of similar sanctions on elites in Venezuela over the past four years. Instead of curtailing their actions, the Venezuelans have used the sanctions as a scapegoat for the country’s dire economic situation. The sanctions were also a key motivation in creating the Petro, Venezuela’s state-backed cryptocurrency. As unrest continues to grow in both countries, there is a risk that the current instability could foster the creation of new criminal groups. According to Insight Crime, newly formed para-police groups could solidify their power and become more involved in organized crime – which is the last thing either country needs.
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