COPENHAGEN (Reuters) - Danske Bank will on Wednesday lift the lid on how billions of euros from Russia and ex-Soviet states flowed through its accounts in Estonia, the latest scandal to highlight Europe’s inability to tackle alleged money-laundering.

Slideshow ( 2 images )

Regulators are eagerly awaiting the Danske Bank DANSKE.CO report, which will mark a critical milestone for the Danish lender and follows calls by Brussels for a new European Union watchdog to crack down on financial crime.

The Danske Bank case has led to speculation in Denmark that its chief executive Thomas Borgen, who was in charge of its international operations, including Estonia, between 2009 and 2012, will step down.

Borgen has said that he was not informed in detail at the time about the problems at the Estonian branch, whose non-resident portfolio has been at the center of allegations of flawed money laundering controls from 2007 to 2015.

Danske Bank and Borgen have declined to comment on recent media reports, which have said the scandal could involve as much as $150 billion worth of transactions, until the findings of the report it commissioned are published.

Investor uncertainty has seen a third of Danske Bank’s stock market value wiped out in the last six months, mainly driven by concerns over the possible involvement of U.S. authorities.

The Wall Street Journal has reported that the United States is already investigating the case as many of the transactions under review were processed in dollars.

Authorities in the U.S. earlier this year accused Latvia’s ABLV of covering up money laundering and the bank was promptly denied U.S. dollar funding, leading to its collapse.

While Danske does not have a banking license in the United States, banning U.S. correspondent banks from dealing with it would amount to shutting it out of the global financial network.

INDEPENDENT INQUIRY

In Denmark, the country’s business minister Rasmus Jarlov, who oversees its banking sector, and other politicians have been critical of the probe, which Danske paid law firm Bruun & Hjejle to coordinate with help from Promontory Financial, PwC and EY.

“I don’t think the investigation has any legitimacy. We need to have an independent investigation into the case,” Lisbeth Bech Poulsen, MP for the Socialist People’s Party, said.

The scandal marks the latest recent low for Danske Bank after the government had to step in and ensure it could pay its short-term dollar debt when international markets froze in 2008.

It has also led to pressure for a wider overhaul of the bank and its leadership once the report is out, while Danish lawmakers on Monday agreed to tighten anti-money laundering laws including a rise of up to 700 percent in fines, making its rules among the toughest in Europe.

While the report will help determine the outcome of current criminal probes in both Denmark and Estonia, Danish expert on money laundering Jakob Dedenroth Bernhoft says potential court cases and fines could come years into the future.

Despite the new tighter anti-money laundering laws, a potential case would be gauged under the less rigorous rules in force at the time of the alleged offences, he said.