The boss of Denmark’s biggest bank has resigned after admitting that the vast majority of €200bn (£178bn) flowing through its Estonian branch was money-laundered cash flowing illegally out of Russia, the UK and the British Virgin Islands.

“It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia. I deeply regret this,” Thomas Borgen said in his resignation statement on Wednesday.

The bank said an independent investigation had found “a series of major deficiencies” in its controls to prevent money laundering. The investigation found that more than half of Danske’s 15,000 customers in Estonia were suspicious.

“We have gone through 6,200 customers starting with the customers hitting most risk indicators first,” the bank said. “Almost all of these customers have been reported to the authorities.”

The investigation found that several dozen of its employees may have colluded with customers to get around background and security checks. The bank said it had reported some of its employees and former employees to the Estonian police.

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The bank’s chairman, Ole Andersen, said the scandal was a “a deplorable matter”. “The findings of the investigations point to some very unacceptable and unpleasant matters at our Estonian branch, and they also point to the fact that a number of controls at the group level were inadequate in relation to Estonia,” he said. “We take the task of combating financial crime and money laundering very seriously, and we do and will do everything it takes to ensure that we never find ourselves in the same situation again.”

Danske only admitted to the true extent of the money laundering scandal on Wednesday following increasing political pressure and US law enforcement agencies this week launching an investigation.

Borgen, who was in charge of Danske’s international operations (including Estonia) before he became CEO in 2013, had previously dismissed other executives’ concerns about Russian transactions in Estonia. In a 2010 investigation Borgen said he had not “come across anything that could give rise to concern”.

The independent report by Danish law firm Bruun & Hjejle on Wednesday found that under Borgen’s leadership the Estonian branch had failed to disclosure the full situation to Danske’s board.

Borgen said on Wednesday that the law firm had not found him to have breached the law. “Even though the investigation conducted by the external law firm concludes that I have lived up to my legal obligations, I believe that it is best for all parties that I resign,” he said.

Estonia’s Financial Supervision Authority (FSA) said it was examining the findings of the investigation. “The report describes serious shortcomings in the organisation of Danske Bank, where risk appetite and risk control were not in balance,” Kilvar Kessler, the chairman of the Estonian FSA, said.

Bill Browder, a US hedge fund manager who has been leading a crusade against corruption and money laundering by rich and powerful Russians, has claimed that Danske’s Estonian branch was involved in the fraud uncovered by his lawyer Sergei Magnitsky, who was beaten to death in a Russia jail.

Danske said it would donate all its profits earned from the suspicious accounts between 2007 and 2015 to a charity focused on “combating international financial crime”. The donation totals 1.5bn Danish kroner (£178m). Analysts expect Danske to be fined billions of dollars by Danish, European and US regulators.

Dutch bank ING earlier this month paid a €775m fine to settle an investigation that it had failed to detect money laundering. Last year Deutsche Bank was fined almost $700m for helping wealthy Russians move about $10bn out of the country.

Credit rating agency Standard and Poor’s has warned Denmark that the scandal may lead it to cutting the country’s AAA credit rating.