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The Bank That Ignored Money Laundering

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A trader for a significant European bank uncovered suspicious payments being run through one of its branches in the Baltic states. The whistleblower informed management, but his claims were not taken seriously. The result of ignoring this report? The laundering of approximately €200 billion over eight years and the chairman and chief executive losing their jobs. 

The affair was described as the “biggest scandal” in Europe when it came to light. The investigation found that 15,000 accounts were involved in the criminal transactions. And yet, when the whistleblower came before the parliament of the bank’s home country, he claimed to have reported wrongdoing on multiple occasions. He insisted that the bank hadn’t taken him seriously. 

Background: False accounting

Five years before the news of the scandal hit the newspapers, the whistleblower began making confidential reports. He made four disclosures to the internal audit unit but received no response. 

His suspicions were raised when he looked into the filing history of a company with open accounts at the bank. The company wanted to get involved with foreign exchange transactions, but he found it was officially dormant with no assets. This was not consistent with the request that it had made. 

He reported this false accounting, but despite a promise that the compliance function would follow up with the company, it remained a client of the bank and continued to file false accounts. On investigating other clients, he found similar situations. 

Eventually, it turned out that payments were being funnelled through the branch between certain European countries and China in a way that violated anti-money laundering laws.

Following a number of unsuccessful reports, the whistleblower left the company and was obliged to sign a non-disclosure agreement. Eventually, he would reveal the details of this NDA, showing that it prevented him from speaking out about the reports that he had made. 

After opting to remain confidential, the whistleblower’s identity was made public by an unknown source soon after the news broke. He has since claimed that this violated his whistleblower rights.

What happened next?

Eventually, the bank’s home country’s financial authorities began to investigate the issue. However, the whistleblower claims they did not contact him during their inquiry. As such, the report came to very little, an issue the European-level investigation would later criticise in the strongest terms. 

It wasn’t until four years after the report and the following pressure that the bank itself investigated the implementation of anti-money laundering procedures. It found them to be lacking, and although executives claimed they had done no wrong, the case cost the chairman and CEO their jobs. 

It was shown that the bank had knowingly dealt with criminals, and eventually, the police became involved. The bank says it expects to pay a material fine of up to €1.3 billion. 

The bank also saw its share price fall by 28% as a result of the public nature of the exposure. 


Why banks should embrace whistleblowers

With a plummeting share price and the prospect of a significant fine for the misconduct that occurred on a grand scale within the organisation, it is clear that the bank should have taken the reports seriously. 

Whether it did not want to hear an inconvenient truth or something more nefarious, by allowing the wrongdoing to continue for so long and at such a rate, it experienced ramifications much worse than if it had taken action in the first instance. If that had been the case, it could have been seen as proactive in the fight against money laundering. By delaying and only investigating after pressure was applied, the bank risked smearing its public image forever. 

Whistleblowers are your frontline defence against misconduct spawning and becoming endemic. They let you take swift action rather than letting the situation become messy and difficult to unpick. 

Creating an easy-to-use reporting system and using a whistleblowing channel that is accessible can prevent detrimental outcomes in such cases. It allows for anonymous and confidential reporting that can mitigate the adverse effects an investigation could bring.

How to handle whistleblowers

IntegrityLog is an online whistleblowing tool that allows for confidential and GDPR-compliant reporting from anywhere on any device. The platform also provides a simple dashboard that keeps you on track with your investigations while helping you meet the requirements for the EU Whistleblowing Directive.
You can request a demo for your business or request a 14-day free trial now. 

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