The Danske Bank scandal drew fresh fire in Brussels after whistleblower Howard Wilkinson attacked British company structures that can hide who is behind them. Wilkinson, who ran Danske Bank’s Baltics trading unit from 2007 to 2014, told European Union lawmakers that the UK’s limited liability partnerships and Scottish liability partnerships had been abused for years.
Wilkinson’s comments came as the fallout from the Estonian branch case continued to spread across Europe and the United States. The payments in question moved through Danske Bank’s tiny branch in Estonia between 2007 and 2015 and have triggered investigations in Denmark, Estonia, Britain and the United States, while also hammering investor confidence in the Danish lender.
Deutsche Bank also moved to distance itself from the affair. Its chief regulatory officer, Sylvie Matherat, said the German lender had only played a secondary role as a correspondent bank and therefore did not need to know the identities behind the transactions. She said the bank acted once suspicious activity was detected, but declined to discuss the volume of payments.
A source with direct knowledge of the matter told Reuters on Monday that Deutsche Bank helped process up to $150 billion in suspicious payments. Britain’s National Crime Agency has separately said it is examining the use of UK-registered companies and a number of so-called professional enablers in connection with the widening scandal. The case has already forced out Danske’s chief executive and chairman.
Danske’s interim chief executive, Jesper Nielsen, told lawmakers the bank had found signs of internal collusion and suspicious activity that still needed investigation. He said it was now for the authorities to determine the exact scale of the laundering and what should happen to the 42 people reported to authorities and the eight reported directly to police.
Wilkinson, whose anonymity was later removed by an Estonian newspaper, told lawmakers that this amounted to a “gross abuse of human rights” because whistleblowers can be left unable to work again. He said he did not support mandatory internal reporting channels, adding that in 2013 he would not have thought to go to Estonian authorities because he trusted his employer to handle his reports properly.
He also urged EU lawmakers to ban non-disclosure agreements such as the one he signed with Danske Bank, saying such deals stop former employees from speaking publicly about wrongdoing. When asked why he signed the agreement, he said: “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.”
The scandal has also raised questions about the role of U.S. banks in clearing dollar payments. Wilkinson repeated his view that almost all the money moving through Danske’s Estonian branch passed through banks in the United States, including one major European lender. He estimated that 80-90 percent of the money ended up in dollars leaving through U.S. correspondent banks into the financial system.
Reuters has previously reported that Deutsche Bank, JPMorgan and Bank of America all cleared dollar transactions for the Estonian branch. A person familiar with the matter said JPMorgan ended its correspondent banking relationship with Danske in 2013 because the transactions did not comply with anti-money laundering rules, while Bank of America declined to comment.
Wilkinson’s U.S. lawyer, Stephen Kohn, said the EU should align whistleblower protection with the United States to help prevent scandals on the scale of Danske. In a written response to lawmakers, he called for a government agency where whistleblowers could report confidentially or anonymously, along with payments of 10-30 percent of proceeds recovered from wrongdoers to encourage reporting.
Kohn also said stronger protection against retaliation was needed, including remedies for loss of reputation, income and emotional distress. He pointed to the U.S. Securities and Exchange Commission’s whistleblower program, which paid $168 million to 13 individuals in the latest financial year, up from $50 million the year before, and has paid $326 million to 59 people since 2011.
Danish lawmakers, meanwhile, pledged after a public hearing on Monday to improve legal protection for whistleblowers as the political and financial consequences of the Danske case continued to grow.
On Tuesday, a coalition of law firms said it would seek compensation on behalf of investors, marking the first move to claim damages against Danske Bank.
Additional reporting by Stine Jacobsen and Teis Jensen in Copenhagen and Kirstin Ridley in London; writing by Alexander Smith; editing by Jason Neely and Keith Weir.
