Danske Bank has acquired several banks over time, and integrated them into the brand. The Estonian branch is such an acquired bank.

After being acquired, the normal procedure for Danske Bank would be to move the newly acquired bank completely over to Danske Bank's banking platform. This platform includes all the Danske Bank business logic and procedures, such as money laundry checks as per EU regulations.

However, in this specific case, it was deemed too expensive, and the new branch was left as is, running its own banking system separate from the rest of Danske Bank.

Someone responsible for that decision, which effectively left that new branch to its own devices, is probably having a bit of a bad taste in their mouth right about now.

Why? Their reasoning then was that it would cost them to much to transfer the bank, “discover” the laundering and paying fines, instead they left it so they could earn more money by the time it was eventually “discovered”.

These aren’t kindergartners running these banks and systems, they knew what was going on. They likely did make the right choice, the fines will be the same since now as they would have been then, and now they have a large profit to pay them from.

The effort to move the bank to their own banking system is on itself a tremendous effort. We're talking calendar years of implementation time, huge risks and a stall of most other development. The leadership knows that their banking systems are a pile of bleeding horse dung that they wish to avoid touching at any cost.

They are not kindergartners, but they are not omnipotent either. Knowing that the Estonian bank had improper processes would by itself require a lot of work to discover, and figuring out if this has been abused would likely be quite a massive task. Doing the move to the new business logic would reveal the issue, but not before it was done.

Never attribute to malice what can be sufficiently explained by incompetence. What we see here can be explained with just a little bit of incompetence, or an extreme amount of malice. The former is far more likely.

They where warned multiple times, that the clientele of that branch, was shady. This was an Estonian Branch, with primarily non estonian customers.

However, my memory and interpretation of this chat may be incorrect. Economists and engineers do have a slight linguistic mismatch.

or not. we're talking about laundering Putin's money. it's not inconcievable that this decision was at least indirectly influenced by the Kremlin.

So, I am fairly confident when my blame-o-meter is reads "incompetence" rather than "malice".

The risk is now a massive fine to Danske Bank. Not by the Danish state. But by either the EU or more likely the Americans.

Danske Bank is the biggest bank in Denmark with +50% of all banking business. It is a liability of the Danish state meaning that if it gets in true trouble the state will bail it out.

One of the benefits of running large banks ( and insurers ) is "privatize profits and socialized losses". These bankers and insurers can't lose. If they gamble and win, they get the rewards. If they gamble and lose, everyone else has to foot the bill.

Not all bank shareholders were wiped out in 2008, while they clearly should have based on the amount of public money some banks got.

If the ECB holds these bonds then technically eu monetary union citizens do have exposure.

To me this seems to have been a dangerous decision by the ECB and other central banks. With their policy, could this have created a situation whereby companies that would not otherwise survive are now over-leveraged. The result being a small disruption bringing everything down with it?

To put the question another way, do we have a massive bubble in corporate debt due to central bank polcies, resulting in companies that should have gone under being over-leveraged.

With the ECB planning to stop the buying by end 2018, will we see a correction?

[0] https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.h...

[1] https://www.wsj.com/articles/central-banks-put-squeeze-on-so...

Edit:

According to JP morgan [3] the policy has created 'zombie' companies.

[3] https://www.bloomberg.com/news/articles/2018-07-18/jpmorgan-...

Would it be that bad? From my simplistic understanding of economics, the Danish central bank can bail it out with minimal side effects, right? And the state would be in a position to ask for a commensurate compensation.

What's scandalous is they didn't insist on wiping out the shareholders.

> FSB representatives served on the board of at least one of banks that wired billions out of Russia as did Igor Putin, Putin’s cousin. He was a manager and executive board member in the Russian Land Bank.

[1] https://www.occrp.org/en/laundromat/the-russian-laundromat-e...

Not one of them has ever explained where he could have come up with ~$200 billion (or the old numbers, which were more like $40b to $50b) from. There is no entity inside of Russia capable of spitting off that kind of hidden side profit - just for him - in the time frame in question. Their entire economy is a mere $1.5 trillion. If you figure most of the graft occured in the last 13 to 15 years, where was he siphoning $12+ billion per year from? Again, there are no entities in Russia capable of subtly delivering that sort of cash.

If he owned 100% of Rosneft (or Lukoil) and Gazprom, he'd still be worth closer to ~$100b-$120b than $200b. Needless to say, he doesn't own those two. He'd have had to be taking a very large share of the annual total industrial profit of Russia, to squirrel away these sorts of numbers over time.

The notion that Putin is secretly the richest person (they keep increasing the mythical sum over time to stay ahead of Gates etc), is nothing more than empty bravado that Russia likes to encourage to artificially prop up the projection of power that Putin relies upon to govern.

That math almost certainly extends to most of the economy because this kind of corruption is damn-near omnipresent in Russian society. I'd need both hands to count the number of times my travel plans were disrupted because someone stole the funds for antifreeze (in Sheremetyevo International no less) or airport/train/border security. Likewise, you could see at Sochi just how vast the chasm was between what was budgeted for and what was actually built. The sheer scale of it is more than enough to generate a few hundred billion dollars for a single person, after paying off all the levels below to maintain power.

Also, what evidence do we have that the stolen funds are even included in the GDP calculation? Are the indicators used to estimate GDP susceptible to the same corruption or can they effectively?

He might not be on the corporate hierarchy, but his decisions override the board.

I would expect that he diversified his wealth all over the world via 'friends', stored in shady wealth management companies, well located banks, and probably few tonnes of good old $$ and gold. Some bankers in one Zurich bank might give you some info (but might not be alive to confirm it afterwards).

But he has good PR - it often looks ridiculous to western eyes, but for most russians it hits some obscure sweet spot. And of course he is not some lone wolf, rather guy on top of a massive pyramid with tons of FSB people who know their stuff a bit too well.

Who else would you be expecting to run huge broken country like Russia for so long so successfully? I mean, even Arafat died as a billionaire, and Palestine ain't some Eldorado to begin with.

That said, it's sort of beside the point. Unlike petty dictators, Putin holds real and substantial power--power that money can't buy outright, and power that he'll probably continue holding until his death. He doesn't need an exit strategy and a golden parachute. OTOH, he secured much of that power redirecting assets. It's less unbelievable that Putin has deliberately permitted $200 billion of embezzled funds to be redirected to those who do his bidding.

He doesn't need the exit strategy now, but it would be stupid of him not to have one (probably more than one), because nobody knows what future will bring. You only need one charismatic opponent to undermine him.

Overall I think he isn't a bad person for the position he has - he is definitely not outright evil, also definitely not weak and probably quite a patriot. But Russia could have achieved much more than where they are right now, with better leadership. At least in theory.

And it's worth keeping in mind that a lot of banks, for governance reasons, will already have been holding in excess of the regulatory requirement. So it's not as if most of the banks will have to come up with this money suddenly - it'll already be there and available.

That's not to say that it's not a large amount of money in absolute terms, but relatively speaking if they were to reduce their loan origination for the year they have to come up with the money be something like 2-3% they'd be totally fine. That's not exactly going to kill the economy.

[1] https://en.m.wikipedia.org/wiki/Capital_requirement

EDIT: Ah, nuts, meant to reply to grandparent rather than parent. Oh well.

The reason I mention this here is that the former President of Estonia is interviewed in the documentary a bit.

I was wondering why would they be interviewing the President of Estonia regarding the Russian Mafia/Manafort/Trump laundering -- Welp - this is why.

https://news.ycombinator.com/newsguidelines.html

The history of banking in most countries is the story of a repeated cycle of abusing the trust of the people with money in the bank: The bank holds people's gold -> the bank issues 'gold certificates' -> the bank issues more certificates than it has gold -> system crashes and everybody loses their money.

In the end, the establishment of national banks to regulate/nationalize the appropriation of wealth.

Here is the history of the Swedish national bank, as an example (it could be copy/pasted from every other European national bank): https://en.wikipedia.org/wiki/Sveriges_Riksbank#History

- How much finance is needed? And how complex?

- Are financial actors capable of seeing a crime when they see it, or pecunia non olet?

There is widespread, high-level, white neck, corruption in northern Europe. And that just the tip of the iceberg.

I doubt venture capitals and other financial solutions were involved in anything that'll make its way into a history book.

Also if hard work led to you having wealth then their wouldn't have been peasants, and even children could buy their own homes after a long day in the fields or mines.

I am an avid critic of the financial industry, but the whole idea of lending money and having a store of it that was trusted enough to accept checks from altered all of society. Prior to that you could only purchase as much material as you had money on hand to buy, or something else to trade. There was no way to borrow 100 dollars to buy materials that you converted into 130 dollars of value without already having 100 dollars

Checks are of course a product of banks, but I fail to see how that should have brought significant change (rather than a bit of convenience). They were certainly never more trustworthy than cash, and they are themselves not more than simply a form of currency. Things like credit agreements are a separate product.

>I fail to see how that should have brought significant change (rather than a bit of convenience).

A bit of convenience can create massive change. What's the difference from online banking compared to buying at a store other than a bit of convenience? You can do all the same things in person, yet we've seen massive changes in logistics and ourchasing habits because of it. Checks that people _trusted_ were massive. You could write someone a document that let them go to somewhere nearby to get gold, rather than carrying it on the roads. This was the modern era where you can travel most European or american roads safely. The world wasn't lawless but the law didn't extend much farther out than the local rulers could patrol. There was always the risk of bandits taking your shipments on land or pirates on the sea. By having a banking system the risk of transferring currency dropped massively and that would lead people to engaging in enterprises that were too risky previously

The Industrial Revolution is not particularly simple but two things are accepted: it wasn't just about technology (besides anything else, if you say it was just technology then you still have to know why technology changed? This question is a central focus of current IR research i.e. McCloskey) and finance was very important (the invention of govt finance/taxation, particularly so).

It maybe isn't worth getting bogged down in the detail but an important part of the industrial revolution was a shift from assembly at home - "proto-industrialisation", which had existed for ~150 years before the IR - to factory-based production. Finance was essential to this process (and impossible without it).

I'd say there needs to be a distinction made between finance going towards funding productive activities and the rampant financial speculation largely divorced from underlying productivity which is where I see a good chunk of modern finance's efforts go towards. Its this latter 'dirty' side of finance I think we can do without - the 40 years post bretton woods period shows its perfectly possible to have a financial system that functions safely.

For large IR type transitions I agree it would have take a lot longer or possibly impossible to see such huge transitions without the power of collective investment. Indeed its no wonder vaclac smil called it the age of Synergy. The chinese may have been coal and natural gas as far back as 10th century but without all the pieces in place they only transitioned to majority coal use in the 20th century

First, the system was not safe...at all. There were pretty much constant financial crises through the 1960s.

Second, the reason why these crises occurred is because the US promised to buy central bank gold at X price. This wasn't sustainable, this caused crises as central banks tried to acquire gold and the UK/US tried to stop them doing so (gold pooling arrangements are an example). It was a fundamentally bad system.

Third, the reason why the system appeared "safe", in today's terms, was govt assumed all the financial risk. Trade and capital accounts were closed, even ones that were open had significant limitations. For the US, this didn't work out terribly because they could keep printing "gold" paper that actually had no value...for everyone else, it was terrible (particularly, the UK). This required some level of protection of domestic industry and resulted in poor competitiveness, high taxes, and high prices for consumers. The funniest thing about this re imagining of the 1960s is that if you actually read what policy makers thought, they believed it was terrible system that would fail (and they were correct).

It is impossible to distinguish between productive and speculative finance, and it is actually very important that you don't try to (this was a major concern in the 1960s and for the IMF, they believed they could control speculative capital movements distinct from productive capital movements...it didn't work). The 19th century saw several financial manias, they produced waste but also tremendous value (canals, railways, electricity, etc.). You can't have one without the other. Finance is risk, and you can't take risk without the possibility of failure.

One of the problems today, typically outside of the US, has been the inability to cope with failure (and so you get lots of idiots saying we just need to get rid of "speculation"). No, the aim of capitalism is to maximise productivity/competitiveness by maximising failure. The solution to this problem is social policy (i.e. Denmark) not trying to fiddle with capitalism. It should be no surprise that this viewpoint has coincided with an increase in concentration of wealth (rich people generally don't like competition/capitalism...another aspect of history that is forgotten).

"First, the system was not safe...at all. There were pretty much constant financial crises through the 1960s."

I cant find any such systemic crashes that happened in the 60s. The 80s were a return to form following financial deregulation following the stagflation of the late 70s when monetary policy was shifted to technocrats in central banks where instead of following the maxim of full employment the shift went to price stability to reverse the effect of the capital strike going on. Even so what few blips there might have been seemed to have been well isolated enough that its ill effects werent globalised unlike today's hyper-connected financial sector.

"Trade and capital accounts were closed, even ones that were open had significant limitations." this part right here was the bit that made these risks relatively independent of one another. The BW agreement was far from perfect for reasons you mentioned however they did put a cap on free flow of capital unlike what we see today. (Central banks pumped how manh hundreds of billions of $ into the finacial sector with zero increase in inflation as predicted by traditional economics? We're at near 0 inflation and thats entirely down to money being able to funnel its way freely)

"It is impossible to distinguish between productive and speculative finance, " - Fair enough. My concern is who gets burned when it goes up in smoke. In our current environment of 'too big to fail too big to bail' the losses are put on the public balance sheet (Greek debt crisis most recently and I believe the president of the eurogroup basically held a gun to the Irish primeminister's head and forced them to socialise the losses of mostly german banks). So absolutely let them fail/succeed just make sure they do it with their own skin in the game and not others

No the risks weren't independent. Again, if you understand what happened in the 1960s then you would realise they weren't. The whole point of the period is that they tried to make it independent, and it didn't work (this isn't wholly true, all central bankers knew it wouldn't work, France in particular, but they saw no other option).

This is not to say that it cannot work...China is a perfect example of it working, it worked during WW2...but the issue is that it causes your economy to malfunction because you remove competition entirely which results in high prices and high taxes (it also isn't that feasible today politically as it requires a significant amount of intervention in day-to-day life i.e. foreign currency rationing, banning certain financial assets like gold, etc.). Again though, the proof is that no-one who has actually lived in the system you are describing thinks it works. For example, China's policymakers would certainly prefer to have a market-based system of finance right now, and they clearly understand how important it was to open their trade account to competition (although they did continue do so in a somewhat limited fashion).

And no, your understanding of the financial crisis is not correct. Ireland socialised losses during the GFC, before the Euro crisis. But the reason for doing that is exactly in line with what you are saying. If you want to limit the damage of speculative finance, then you socialise losses. That is what happens in China, it is what happened during WW2, it is what happens when you have don't a freely floating currency (which is what you are suggesting), and it happened in the 60s (the only reason the speculative attacks in the 60s were fended off were huge loans from central banks to Britain to ensure they didn't devalue and trigger a speculative attack on the dollar).The only new issue that the GFC raised was the wisdom of mixing the payment system into banks.

If I had to boil down the mistakes you are making (aside from not reading about the actual events that occurred): the reason we came here is because there is no other choice. You cannot control speculative forces and have a productive economy, it is one or the other. But the other mistake you are making is assuming that the only way to limit the effect of capitalism is by doing weird dictatorial stuff they even knew was stupid six decades ago (like trade controls, which Trump is trying now). Again, Denmark is a perfect example: they have one of the most capitalistic societies anywhere (probably more so than the US) and just use social policy to limit the damage...without interfering in the market. It works fine. The issue is that most people believe (or are told) that it is a black or white choice (there is a correlation here with the political system, adversarial-style democracy isn't particularly effective).

I wouldnt advocate for a return of BW - but the one core aspect of what it aimed to achieve, namely global stability, can I believe be achieved without the free option call on society you describe as essential for having globalised finance. Keynes' version of BW would have involved a central clearing house of sorts between countries that would nullify the negative effects of unbounded capital flows by using a common currency. I dont remember the exact details but the big wig at the IMF and the Chinese central bank seemed pretty pro this idea.

"And no, your understanding of the financial crisis is not correct. Ireland socialised losses during the GFC, before the Euro crisis..." Well no. The reason they socialised losses has nothing to do with some inherent requirement to make finance work but because the Euro is a dumb idea as it doesnt allow countries to run a deficit (unless youre Italy/France and too big to kick out) so the only solution to paying off debts is austerity. The reason they had to socialise losses was a faustian bargain also offered to the greeks - basically you socialise our private bank's losses (take out an additional loans) else we switch off your banks and you're dead. Only cutting spending in a downturn is stupid and only makes the debt/gdp ratio worse but first rule of politics is never let facts get in a way of a beautiful theory (austerity)

" the reason we came here is because there is no other choice. You cannot control speculative forces and have a productive economy, it is one or the other." - no. Thats a huge leap to make and has little to no evidence to support the claim. The reason lots of Euro countries socialised losses is not because its a universal law like gravity but due to political expedience. Fundamentally its just unfair to privatise profits and socialise losses.

Sorry I cant comment on the Danes! I'll have a read up

However, some financial products emerge naturally between individual parties, such as credits and small-scale loans. I think the most noticeable loss would be the lack of mortgages (i.e. having to pay for a house up front). No simple means for online purchases would also be inconvenient (Bitcoin is still not a viable normal solution).

Didn't Ireland have a complete and total bank strike for a full year in the 1970's, with absolutely no negative side-effects?

Mortgages aren't great but having to pay for a house up front would move empower rentiers even further.

I just think you need to be specific, you're already down the path of realizing that some (but not all) of this is like laws of nature, saying that there's no value in a financial sector just seems ignorant.

May 7 – July 30, 1966

May 1 – November 17, 1970

June 28 – September 6, 1976

According to Wikipedia[1], the banking strikes had little affect on the preexisting economic woes, namely both high unemployment and inflation.

[1] https://en.wikipedia.org/wiki/Irish_bank_strikes_%281966%E2%...

Ireland in the 70s was not a prosperous place, and trying to pay for things with second and third and fourth-hand uncashed cheques was a massive headache for everyone.

Jokes - there's nothing wrong with a sensible financial sector but our current over-financialised world of financial speculation with the public being required to bail out financiers is dangerous and needs to be reigned. This to me is just another example of how useless a good chunk of modern finance is

A good story to tell here is the total bank strike in Ireland that lasted a year, where everything operated just fine without the banks.

So... like Silicon Valley then?

(I guess we're both getting downvoted today huh)

... and personal loans, commercial loans, transactions and transfers, overdraft agreements, insurance brokerage, underwriting, and reinsurance.

Ireland was poor and undeveloped economy during 1966–76 bank strikes. Irish pound had one-to-one link to pound sterling, so Ireland didn't even have monetary policy. Companies were able to operate with their accounts in UK banks. Today it would be total chaos.

For personal use, mortgages is the only normally needed product. Non-mortgage personal loans and overdraft agreements are not necessities (and seems to invite poor financial management).

The rest are insurance products, which are also on the nice-to-have list.

However, loans and insurance are a tiny fraction of what the financial sector does. The vast majority of other products would go mostly unnoticed if gone.

> Today it would be total chaos.

Briefly, yes. Some things without real value would collapse. But I strongly believe that it would stabilize within the first year.

Always measure their utility Vs how well they serve everything outside of finance.