On February 16, the U.S. Securities and Exchange Commission (SEC) announced the establishment of a $178.6 million Fair Fund to be distributed to investors harmed in Danske Bank’s historic money laundering scheme. The scheme was originally exposed by a whistleblower: former Danske banker Howard Wilkinson.
The establishment of the massive Fair Fund underscores the tremendous impact the SEC Whistleblower Program has in protecting harmed investors. While no whistleblower award has been paid in connection with the case, it is public knowledge that the scheme was uncovered by Wilkinson’s whistleblowing.
On December 13, Danske Bank pled guilty and agreed to pay over $2 billion to settle money laundering charges by the SEC and Department of Justice (DOJ). The authorities alleged that “from at least 2009 to 2016, Danske Bank, through its Estonian branch, provided banking services to suspicious customers despite knowing there was a high degree of risk that such customers were potentially engaged in money laundering,” according to the SEC.
The Fair Fund established by the SEC is financed by the $178.6 million civil penalty paid by Danske Bank as part of the settlement. The Fund will be used to reimburse harmed investors and is held in a Commission-designated account at the U.S. Department of the Treasury.
In 2013, Wilkinson noticed suspicious activity in Danske Bank’s records while working as the head of the bank’s Baltic trading unit. When he investigated further, he found a $234 billion laundering scheme. The money allegedly came from Russia and other post-Soviet countries to Estonia and then flowed to high-profile European and American banks.
Wilkinson repeatedly reported his concerns internally before resigning in 2014 because his reports were being ignored. However, in 2018, news broke of Danske Bank’s $234 billion money laundering scheme. An independent audit of Danske Bank confirmed that Wilkinson had first made the bank aware of its AML control failures.
“Howard Wilkinson is an international hero,” said Stephen M. Kohn, the whistleblower attorney who represents Wilkinson. “His contributions toward anti-corruption are historic. Without any whistleblower protections in Estonia he had the courage to disclose the world’s largest money laundering scheme estimated at over $240 billion. The money was laundered from Russia and former Soviet republics to western banks. An internal investigation demonstrated by Putin’s family and the Russian FSB (secret police) were part of the scandal.”
“After years of investigation, the DOJ and SEC have completely validated all of his allegations and issued a multi-billion dollar penalty against Danske Bank,” continued Kohn, a founding partner of Kohn, Kohn & Colapinto. “We hope this case acts as a warning to all banks that they should immediately report information about Russian money laundering and sanctions-busting to the appropriate authorities.”
The SEC Whistleblower Program, which offers monetary rewards and anti-retaliation protections to individuals who voluntarily disclose financial crimes, has played a key role in returning money to harmed investors since it was established in 2010. For example, on January 19, the SEC awarded $18 million to three whistleblowers whose disclosures led to millions of dollars being returned to harmed investors.
Overall, according to the SEC Whistleblower Program’s most recent annual report, “enforcement actions brought using information from meritorious whistleblowers have resulted in orders for more than $6.3 billion in total monetary sanctions, including more than $4.0 billion in disgorgement of ill-gotten gains and interest, of which more than $1.5 billion has been, or is scheduled to be, returned to harmed investors.”
“As citizens, we entrust our government, our police and prosecutors, even our banks and their regulators with the responsibility to dissuade, identify and prosecute money laundering and other crime,” Wilkinson told WNN for a Whistleblower of the Week profile. “But we don’t abrogate all responsibility; sometimes, as citizens, we have to do our part too. That’s what I see myself as having done, which was clearly the right thing to do in the circumstances.”