Estonia affair will tighten checks on money laundering

Subject

The impact of the recent money laundering scandal.

Significance

Danske Bank has lost 28,000 private customers in Denmark between January and June 2018, Reuters reported on August 14. The unfolding money-laundering scandal at Danske Bank’s Estonian branch has sparked a criminal investigation and put the failings of financial supervision under the spotlight in both Estonia and Denmark. Danske Bank, Denmark’s largest lender, has shut down its Estonian operations. The process will be costly for Danske Bank in terms of both money and reputation. It also serves to draw further attention to illicit flows from former Soviet states to the EU. Many countries, including the United Kingdom, have already tightened their legislation accordingly.

Impacts

• The bank will find it more difficult to expand its operations outside its traditional geographical territories.
• Tighter EU regulations against money-laundering will increase banks’ compliance costs.
• Some market segments, such as non-resident operations, may become just too costly to service.