Europe Goes Harder on Money Laundering With Record ING Fine

Banking group ING Groep ING -1.25% NV has agreed to pay a record European fine of €775 million ($899.8 million) to settle an investigation by Dutch prosecutors into money laundering failings, as watchdogs scramble to staunch flows of illicit money after a spate of high-profile scandals.

Also Tuesday, Danish lender Danske Bank DNKEY -6.41% saw its shares tumble 6.5% following a report that local prosecutors had uncovered a higher than expected tally of allegedly illegal Russian money moving through its Estonian branch.

Banks world-wide are under increasing pressure to clamp down on the trillions of dollars’ worth of illegal money flowing through the global financial system.

The U.S. has led the way in policing banks in the past decade. Since 2008, it has imposed around $23.52 billion in fines, according to consultants Fenergo, hitting lenders whose ineffective systems officials say have let clients launder money out of countries such as Mexico, Russia and Venezuela. In contrast, European regulators and prosecutors extracted $1.7 billion over such breaches in the same period, including Tuesday’s ING fine, according to the consultants.

The EU’s anti-money-laundering laws are policed by a patchwork of local regulators, which critics say leaves it open to criminal abuse.

More recently, local regulators have toughened their stance after embarrassing data leaks from whistleblowers on company money laundering and tax avoidance and criticism that the authorities have been too meek in pursuing such transactions.

ING shares fell 2.6% Tuesday following the announcement as Dutch prosecutors said it had been “seriously deficient” as a gatekeeper of the financial system. The bank, for instance, handled bribes paid by telecommunications company VimpelCom Ltd. to the daughter of Uzbekistan’s former president and didn’t report the suspicious transactions to regulators for several years, the prosecutors said. In 2016, Amsterdam-based VimpelCom, now called VEON Ltd., paid $795 million to the U.S. and Netherlands to settle the matter.

Other infractions ranged from poor client record-keeping to helping a Suriname client launder money through electronic payment terminals.

Danish authorities have been investigating Danske Bank since a whistleblower flagged issues at its Estonian branch in 2013. The Financial Times reported Tuesday that consultants had found that up to $30 billion of Russian money flowed through the Baltic branch, far higher than previously thought. In a statement, Danske said it wasn’t able to verify the number. The bank expects to publish the findings of an internal investigation into the matter later this month.

“The main concern for investors remains whether the U.S. regulator becomes involved,” Citigroup analysts said. So far Danish and Estonian authorities are leading investigations, but U.S. involvement could see any eventual fines increase substantially, analysts said.

U.S. authorities have already heavily punished European banks for failings in money laundering compliance. In 2014, French lender BNP Paribas SA pleaded guilty and paid $8.97 billion to U.S. authorities to settle charges it disguised transactions with clients in sanctioned countries. Britain’s HSBC Holdings PLC in 2012 paid $1.9 billion to settle U.S. charges that included allowing Mexican drug cartels to launder money through the bank.

The Danske debacle highlighted ongoing concerns about what is seen as a particular weakness in Europe: Russian customers using Nordic and Eastern European banks to shuffle funds across the European Union.

In February this year, the U.S. Treasury declared Latvia’s ABLV bank an “institutionalized money laundering” operation and cut its access to dollars. The bank closed down shortly after. Around the same time, Estonian Versobank AS had its bank license revoked by the European Central Bank after regulators found money laundering deficiencies.

https://www.wsj.com/articles/europe-goes-harder-on-money-laundering-with-record-ing-fine-1536072973