BRUSSELS (Reuters) - British company structures which hide the identity of those behind them were branded a disgrace by the whistleblower who brought to light an alleged 200 billion euro ($228 billion) money laundering scandal involving Danske Bank.
“The role of the United Kingdom is an absolute disgrace. Limited liability partnerships and Scottish liability partnerships have been abused for absolutely years,” Howard Wilkinson, who headed Danske Bank’s Baltics trading unit from 2007 to 2014, told European Union lawmakers on Wednesday.
And in a sign of the wider repercussions of the Danske Bank affair, Deutsche Bank said it played only a secondary role as a correspondent bank, limiting its need to know about the people behind the transactions.
Chief Regulatory Officer Sylvie Matherat said that the German bank had acted once it noticed suspicious transactions, but declined to comment on the volume of payments.
Deutsche Bank helped process up to $150 billion in suspicious payments, a source with direct knowledge of the case told Reuters on Monday.
Payments made through the tiny Estonian branch of Denmark’s biggest bank between 2007 and 2015 have triggered investigations by authorities in Denmark, Estonia, Britain and the United States and caused anger among shareholders who have seen the value of their investments in Danske Bank tumble.
Britain’s National Crime Agency (NCA) has said it is investigating the use of UK-registered companies and a number of so-called professional enablers in connection with the widening scandal, which has already led to the departure of both Danske’s chief executive and chairman.
Danske Bank shares: tmsnrt.rs/2PKHpuE
On Tuesday, a coalition of law firms said they would be pursuing compensation on behalf of investors, in the first move to claim damages against Danske Bank.
Danske Bank’s interim CEO Jesper Nielsen told the EU lawmakers that it had found signs of internal collusion and suspicious activity that needed to be investigated.
“It is up for the authorities now to determine the exact level of money laundering and the same goes for what happens to the 42 people that have been reported to authorities and the eight that has been directly to the police,” Nielsen said.
Wilkinson, whose anonymity was ended by an Estonian newspaper, said this was a “gross abuse of human rights”, in part because whistleblowers risk never working again.
The Briton said he did not back mandatory internal reporting channels for whistleblowers, although he said it would not have crossed his mind to go to Estonian authorities in 2013 because he trusted his employer to deal properly with his reports.
He also called on EU lawmakers to ban non-disclosure agreements (NDAs) such as the one he signed with Danske Bank, which prevent former employees speaking out over wrongdoing.
“I took the view that the right thing to do was to take his (a senior executive’s) word for it and take the money,” he said when asked why he had signed an NDA with Danske Bank.
Wilkinson reiterated his view that almost all the money that flowed through Danske Bank’s Estonian branch passed through banks in the United States, including one major European lender.
“In my estimate 80-90 percent of the money that went through Danske Bank ended up in dollars leaving through U.S. correspondent banks into the financial system,” he said.
Deutsche Bank, JPMorgan and Bank of America all cleared dollar transactions for Danske’s Estonian branch, sources have told Reuters.
JPMorgan ended the correspondent banking relationship with Danske in 2013 on grounds that transactions did not comply with anti-money laundering rules, a person familiar with the matter said on Monday, while Bank of America has declined to comment.
Wilkinson’s U.S. lawyer Stephen Kohn has said the EU should harmonize whistleblower protection with the United States to avoid major money laundering scandals like the Danske incident.
In a written response to the EU lawmakers, Kohn called for the establishment of a government agency where whistleblowers can report confidentially or anonymously, as well as payments of 10-30 percent of the proceeds obtained from wrongdoers to incentivize whistleblowers to step forward.
A number of U.S. authorities offer financial rewards to incentivize informants to help recover billions of dollars lost to large-scale and often well hidden economic crime.
The U.S. Securities and Exchange Commission (SEC) says it alone paid $168 million to 13 individuals in the latest financial year, up from $50 million in the previous year. It has handed $326 million to 59 people since the program began in 2011.
Increased protection for whistleblowers against retaliation, and remedies to compensate them for loss of reputation and income and emotional distress, is also crucial, Kohn added.
Danish lawmakers pledged to improve legal protection for whistleblowers following a public hearing on Monday.
Additional reporting by Stine Jacobsen and Teis Jensen in COPENHAGEN and Kirstin Ridley in LONDON; writing by Alexander Smith; editing by Jason Neely/Keith Weir