Denmark's largest bank laundered €7bn of dirty money in an "astronomical" case that could spur new Russia sanctions.

The affair, linked to the murder of a Russian whistleblower, also posed questions for Danish financial authorities, who were first alerted five years ago and did nothing.

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Browder (r) in the European Parliament with Magnitsky's son and widow (Photo: europarl.europa.eu)

The revelations, based on Danske Bank documents obtained by Danish daily Berlingske, showed that the amount of money involved was more than double that previously reported in 2017.

The 43,112 fishy transactions concerned Russian shell firms registered in Caribbean tax havens that moved money out of Russia via Danske Bank's Estonian branch between 2007 and 2015.

Most of it ended up being spent on luxury properties, cars, and gems.

All the firms in question, such as Diamonds Forever International, Castlefront, and Megacom Transit, were also linked to a Russian fraud involving the killing of a whistleblower named Sergei Magnitsky.

Russian officials, security chiefs, and mafia bosses embezzled some €200m ($230m) from the Russian tax office in 2007 in a complex fraud involving Hermitage Capital, a British hedge fund, whose lawyer, Magnitsky, exposed the affair, and who ended up dying in prison.

"We found 20 accounts at Danske Bank connected to the transfer of funds from the $230m that Sergei Magnitsky exposed and was killed over," Bill Browder, Magnitsky's former employer, told EUobserver on Thursday (5 July), describing the funds as "blood money".

"The Danish authorities seem to be asleep at the switch and refused to open a criminal case when we first approached them in 2013 about criminal proceeds from the Magnitsky case flowing through Denmark," he added.

Browder has followed the money trail for the past nine years, prompting ongoing investigations in 15 countries, including Cyprus, France, Spain, Switzerland, the UK, and the US, but not Denmark.

The trail has led to the highest echelons of the Kremlin, including personal friends of Russian leader Vladimir Putin.

Browder has also campaigned for targeted sanctions against Russian human rights abusers.

Four EU states (Estonia, Latvia, Lithuania, and the UK) as well as Canada and the US have already imposed so-called Magnitsky Acts.

Danish, Dutch, and Swedish MPs have also held hearings on imposing similar measures, with Browder saying that the Danske Bank scandal ought to be a wake-up call for Danish people, many of whom held accounts at the lender.

"I'm often asked the question: 'What does the Magnitsky Act have to do with Denmark?' The answer is that this isn't some theoretical issue with Denmark. The blood money from the Magnitsky case flowed through a Danish bank in a significant way," he told EUobserver.

Impunity?

The risk that Danske Bank could face fines saw its share price fall by three percent when the Berlingske story came out.

The bank's CEO, Thomas Borgen, could also lose his job, or worse, given the egregious nature of the violations.

"This is very serious," Danish business minister, Rasmus Jarlov, told press.

"It's obviously not satisfactory that large sums of money were made laundering funds and that that money is still with Danske Bank. This offends my sense of justice, and everyone else's", he said.

Jakob Dedenroth Bernhoft, a Danish fraud expert, called the sum in question "astronomical".

"It's the biggest known ongoing money laundering case worldwide," Christian Thatje, a trader at Denmark's Sydbank, said.

Others said Danske Bank must have known what was going on.

"Any competent investigator would have come to the conclusion that this was … money laundering," Graham Barrow, a British fraud expert, told Berlingske.

But the lesson from the affair so far, Browder noted, was: impunity for white-collar villains.

"At the moment, the lesson is that there is no consequence for management of banks who allow money laundering to take place. The key senior management of Danske Bank are still untouched by law enforcement after many years and multi-billion dollars of money laundering has taken place right under their noses," he said.

Denmark reacts

Jarlov, the Danish minister, said the country's Financial Supervisory Authority (FSA) was "reviewing the new information that Berlingske reported" and could take "possible actions".

But unless the FSA steps in, that leaves Danske Bank to face only its own internal scrutiny in a probe due to publish findings in September.

"It is too soon to make any conclusions," the bank said.

Its internal probe was taking a long time because of the "massive" amount of material it had to review, including "millions" of emails, it said.

But there was no need for an external investigation because the bank was taking the matter "very seriously", it added.

"How can an investigation launched by Danske Bank be trusted?" it asked in an FAQ on the affair published on its website.

"The investigations are overseen by Danske Bank's board of directors. The investigations are managed by external law firms in cooperation with leading international experts," it replied to its own question.