Deutsche Bank is said to be drawn deeper into Danske scandal

Deutsche Bank is being drawn deeper into the widening money-laundering scandal surrounding Danske Bank.

Howard Wilkinson, the whistleblower at the center of the affair, said about $150 billion of suspect funds were funneled through the U.S. subsidiary of a European lender that served as Danske’s main correspondent bank for dollar transactions. That’s Deutsche Bank, a person familiar with the matter said, asking not to be declined as the matter is private. Wilkinson stopped short of identifying the bank in testimony before Denmark’s Parliament on Monday.

Christian Sewing
FILE: Christian Sewing, management board member of Deutsche Bank AG, speaks during the bank's earnings news conference in Frankfurt, Germany, on Thursday, Feb. 2, 2017. The appointment of Sewing as Deutsche Bank AG’s chief executive officer to replace an embattled John Cryan after less than three years -- and three turnaround plans -- answered just one of the questions hanging over the struggling institution. Photographer: Alex Kraus/Bloomberg

The German lender was a correspondent bank for the Tallinn, Estonia, branch of Danske Bank that is the focus of multiple international investigations. The Danish lender acknowledged that the branch moved nearly a quarter of a trillion dollars worth of cash into the global financial system, much of it from potentially illicit activity in Russia. It used the global presence of Deutsche Bank, Bank of America and JPMorgan Chase to convert foreign cash into U.S. dollars on behalf of its clients from 2007 to as recently as 2015.

“This was the main correspondent bank for U.S. dollars,” Wilkinson said of the bank only identified as a large European lender. “And they were the last one to go; it took them until 2015, at least nine years.” Deutsche Bank declined to comment.

In his first public appearance since the Danske scandal erupted, Wilkinson told lawmakers in Copenhagen that he was offered a severance package to stay silent about the suspicious funds that gushed through the Baltic unit where he worked as head of trading until 2014.

Deutsche Bank has been contacted by U.S. criminal investigators for information over the case, along with Bank of America, two people familiar with the matter said late last week. The Justice Department investigators have also asked questions about JPMorgan Chase's work with the branch, another person said. Wilkinson on Monday said he didn’t want to name banks because he is concerned he could go to jail or face other legal action.

The examination of whether the big banks gave appropriate scrutiny to the Estonia transactions is one aspect of a broader Danske Bank investigation being led by the U.S. Justice Department in Washington and prosecutors from the Manhattan U.S. attorney’s office, the people said.

The potential extent of Deutsche Bank’s role in the scandal — Danske Bank has admitted that a large portion of the roughly $230 billion that flowed through its Estonia branch during the period under scrutiny was suspicious — will be an unwelcome setback from Chief Executive Officer Christian Sewing as he seeks to revive growth at the lender.

JPMorgan stopped providing correspondent services to the Danske Bank branch in 2013. Deutsche Bank and Bank of America continued for another two years, according to the reports and the people familiar with the matter. Deutsche Bank handled the bulk of these transactions during the period under scrutiny, one of the people said.

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