By Jacob Gronholt-Pedersen and Teis Jensen
COPENHAGEN (Reuters) - Danske Bank's chief executive Thomas Borgen resigned on Wednesday after a investigation revealed payments totalling 200 billion euros ($234 billion) through its Estonian branch, many of which the bank said were suspicious.
The Danish bank detailed compliance and control failings amid growing calls for a new European Union watchdog to crack down on financial crime after a series of money laundering scandals which have attracted the attention of U.S. authorities.
"Even though I was personally cleared from a legal point of view, I hold the ultimate responsibility. There is no doubt that we as an organization have failed in this situation and did not live up to expectations," Borgen, who will stay on until a new CEO is appointed, told a press conference.
Borgen, 54, was in charge of Danske Bank's international operations, including Estonia, between 2009 and 2012.
Danske Bank said in a summary of a report covering around 15,000 customers and 9.5 million payments between 2007 and 2015 that Borgen, Chairman Ole Andersen and the board "did not breach their legal obligations".
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Andersen said the bank had made an assessment of whether it violated U.S. laws, a key concern for shareholders, but declined to share its conclusion when asked at a press conference.
The Estonian non-resident portfolio included customers from Russia, Azerbaijan, Ukraine and other ex-Soviet states, the investigation, which began a year ago after the Berlingske newspaper revealed alleged misconduct at the branch, found.
Danske Bank, whose already battered shares fell by nearly 8 percent during morning trading, said some 6,200 customers had been examined so far and it expected "a significant part of the payments to be suspicious".
Shares in Danske Bank had doubled in value from when Borgen took over as CEO in 2013 until July 2017, but have since lost more than a third as allegations of suspicious transactions increased and Denmark and Estonia began criminal investigations.
The bank said it had taken action including "warnings, dismissals, loss of bonus payments and reporting to the authorities" against current and former staff, as well as overhauling the systems which had contributed to the lapses.
In an indication of the potential costs such failings can have on a bank, Dutch bank ING agreed to pay 775 million euros ($900 million) this month after admitting criminals had been able to launder money through its accounts.
And earlier this year U.S. authorities accused Latvia's ABLV of covering up money laundering, leading to the bank being denied U.S. dollar funding and its swift collapse.
While Danske does not have a banking licence in the United States, banning U.S. correspondent banks from dealing with it would amount to shutting it out of the global financial network.
SERIOUS SHORTCOMINGS
The report found that Danske Bank failed to take proper action in 2007 when it was criticised by the Estonian regulator and received information from its Danish counterpart that pointed to "criminal activity in its pure form, including money laundering" estimated at "billions of roubles monthly".
And when a whistleblower raised problems at the Estonian branch in early 2014 the allegations were not properly investigated and were not shared with the board, Danske said, adding that measures to get its business there under control had been insufficient.
Danske Bank also said the Estonian branch did not employ its anti-money laundering procedures because it had decided not to migrate its Baltic banking activities onto the bank's IT platform, because it would have been too expensive.
"The report describes serious shortcomings in the organisation of Danske Bank, where risk-appetite and risk control were not in balance," the head of Estonia's FSA financial regulator Kilvar Kessler said in a statement.
Danske Bank, which cut its forecast for annual net profit to 16-17 billion Danish crowns, from a previous 18-20 billion, has successfully overcome previous traumas.
The government had to step in and ensure it could pay its short-term dollar debt when international markets froze in 2008 and in 2012 it was criticised for an advertising campaign that sought to improve its image, borrowing symbols linked to the anti-establishment movement Occupy Wall Street.
Prior to the money laundering scandal, Borgen had managed to improve the bank's image and earnings in part by cutting costs, shifting its focus to wealthier clients and expanding in Sweden and Norway to rival the Nordic region's biggest bank, Nordea.
($1 = 0.8553 euros)
(Reporting by Jacob Gronholt-Pedersen and Teis Jensen, additional reporting by Emil Gjerding Nielson; editing by Jason Neely and Alexander Smith)