The Danske Bank A/S logo sits on its branch in Tallinn, Estonia, on Friday, Oct. 4, 2019. Picture: PETI KOLLANYI / BLOOMBERG
The Danske Bank A/S logo sits on its branch in Tallinn, Estonia, on Friday, Oct. 4, 2019. Picture: PETI KOLLANYI / BLOOMBERG

Moscow/Tallinn — Between 2009 and 2015, Mihhail Murnikov spent his days handling as many transactions as he could at the non-resident unit of Danske Bank in Estonia.

Roughly a year after Danske admitted that those transactions were part of a $220bn money laundering scandal, prosecutors from Tallinn to Washington are still trying to get to the bottom of what really happened. The Danske case recently made headlines again after the man who used to run the bank’s Estonian operations committed suicide.

Murnikov is now a suspect in the case — like most of the 14 people who worked in Danske’s international banking unit in Tallinn. He says his time there was spent trying to live up to targets set by his bosses to earn a bonus.

“The whole non-resident business was built on one principle: everyone was making money on cross-border transactions because non-residents had to pay $90 per transaction,” Murnikov said in an interview in Estonia’s capital, Tallinn. Danske’s costs associated with each transaction amounted to $1, he said.

By 2013, when profits peaked, Murnikov says Danske’s Estonian bankers were told to process close to half a million transactions for 4,000 non-resident clients, mostly from the former Soviet Union. That year, returns at the non-resident unit hit 402%, compared with about 7% for the whole Danske Bank group.

“I had a clear plan,” Murnikov said. With the 300 clients he had, the former banker says he needed to “make 40,000 transactions a year so I could get a bonus”. He says the only metric Danske used to determine an employee’s bonus was the number of transactions he or she handled.

“You were directly motivated by getting as many clients as possible. Everything else wasn’t important,” he said.

In an e-mailed comment sent on Sunday, a Danske Bank spokesperson said: “As authorities are still investigating the matter, we cannot comment further beyond what we disclosed in the report of September 2018. As we have previously said, we should have never had the now closed portfolio of non-resident customers in Estonia.”

The bank shut the non-resident unit in 2015 and has repeatedly said it is co-operating with the authorities.

Danske started liquidating its Estonian operations this month, after being thrown out by the regulator. Its logos are now being expunged from the landscape, including from the building in downtown Tallinn that used to house the local head office.

The picture painted by Murnikov of the culture that dominated the non-resident unit fits largely with evidence provided by the Danske whistle-blower, Howard Wilkinson. As head of Danske’s Baltic markets division in Tallinn, he repeatedly warned senior management in Copenhagen that the transactions being handled looked suspicious.

Danske admitted in September 2018 that a “large part” of the $220bn in non-resident flows that went through the Estonian unit between 2007 and 2015 were suspicious. It is under criminal investigation in Denmark, Estonia, France and the US.

The affair has had disastrous consequences for many of the top bankers associated with the case. Danske’s former CEO, Thomas Borgen, has had preliminary criminal charges brought against him since being fired last year. Estonian police have detained numerous former bankers and Aivar Rehe, the unit’s CEO until 2015, took his life almost a year to the day after the full scope of the laundering scandal became public. Police said he wasn’t a suspect, but Rehe had told local media earlier this year that he felt “responsible”.

For shareholders, finding out who knew what, and when, is key as Danske faces several class action lawsuits. The laundering scandal has decimated the bank’s market value, with the share price plunging almost 50% in 2018. So far this year, shareholders have lost another 30%.

Bloomberg