US ratings agency Moody’s Investor Service has downgraded its long-term ratings for Denmark’s biggest bank, Danske Bank, which is at the center of a scandal over alleged money-laundering.
The decision “follows the announcement that the bank is the subject of criminal investigations by the US Department of Justice linked to money laundering through its Estonian branch between 2007-2015,” Moody’s said in a statement.
Investors and clients have already headed for the exits amid growing fears of a possibly huge US fine for laundering funds for 15,000 mainly Russian clients.
Danske Bank has itself identified the equivalent of 200 billion euros ($231 billion) in “suspicious” transactions from 2007-2015 on behalf of 15,000 clients, including top Russian politicians and companies based in Denmark.
According to a Financial Times report, Danske earned 10 million euros in 2013 through mirror trades that used Russian bonds, which the Danish lender acknowledged raised a “potential reputational risk in being seen to be assisting capital flight from Russia.”
The ratings agency downgraded its long-term deposit and senior unsecured debt ratings from A1 to A2. Both ratings are within Moody’s “upper-medium grade.”
The money-laundering investigation “has increased the probability that Danske will receive substantial financial fines,” Moody’s said, adding that the probe will also “consume a significant amount of resources and managerial focus.”
Denmark, like its Nordic neighbors, is considered a model of transparent governance and the total amount of the suspicious transactions is 10 times Estonia’s national output in 2014.