Danske Bank A/S Chief Executive Officer Thomas Borgen will step down amid allegations that the lender he oversaw was the center of a major European money laundering scandal involving billions of dollars in illicit funds over several years.
Borgen, who was promoted to run Denmark’s biggest bank in 2013, will continue in his job until a replacement is appointed, Copenhagen-based Danske said on Wednesday. The bank didn’t say how long that might take.
“It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia,” Borgen said in the statement. “I deeply regret this.”
The allegations of laundering have shocked Denmark, a country generally associated with some of the world’s lowest levels of corruption and highest levels of transparency. The bank is the target of criminal complaints alleging its Estonian operations were used to launder as much as $9.1 billion between 2007 and 2015, with the illicit funds stemming mostly from Russia. Danske said on Wednesday it wasn’t able to provide an accurate estimate of how much dirty money was funneled through its Baltic operations.
“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,” Borgen said. “As the CEO, I have the management responsibility for the things that take place in the bank, and, of course, I take on this responsibility.”
The 54-year-old is leaving after half a decade at the helm of Denmark’s biggest bank. His career spanned a number of key roles at Danske, most notably, as head of its international operations while much of the laundering was taking place.
“It has been clear to me for some time that resigning would be the right thing to do, but I have held off the decision, because I have felt a responsibility for seeing the bank through this difficult period towards presentation of the investigations,” Borgen said.
The scandal has triggered widespread indignation across Denmark, with both the government and the central bank warning that Danske’s involvement in laundering could hurt the reputation of Denmark’s entire financial system. S&P Global Ratings even said the case might end up affecting Denmark’s AAA credit rating.
The government has already made clear that Wednesday’s report won’t be the final word on the case, and Danske remains the target of criminal investigations in Denmark and Estonia. Danish media have also reported that U.S. authorities are looking at the case, which has the potential to drag on for several more months.
Danske also cut its full-year outlook on Wednesday, partly due to a 1.5 billion-krone ($230 million) so-called donation it plans to make to an independent foundation to support the fight against international financial crime. The amount equals profit from suspicious transactions that took place in the non-resident portfolio of its Estonian branch from 2007 to 2015.
Danske now sees full-year net income on a range of 16-17 billion kroner down from a previous forecast of a result “in the lower end” of a 18-20 billion-krone range.
Danske said a “subdued development in net trading income” was also to blame for the lower outlook.
--With assistance from Anna Molin, Hanna Hoikkala and Ott Ummelas
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