On October 16, the Luxembourg Times reported that, with regard to the Danske Bank scandal, Estonian Minister of Finance Martin Helme stated on his Facebook page that
he wants to figure out “how to ensure that the money laundering investigations of our banks that have been launched by the US authorities, which will very likely end with huge fines, would be conducted so that we would be involved in the process throughout and that the majority of the fine would in the end come into the Estonia budget”.
Helme stated that he was in New York and had had discussions with lawyers in what he described as “an international law office” about “how to ensure that Estonia takes part in investigations by US authorities now underway and that his country receives proceeds from penalties imposed on lenders.” He added that “We are talking about hundreds of millions at least, possibly about billions.”
An Estonian Ministry of Finance spokesman, Ott Heinapuu, separately stated “that the Estonian government hasn’t signed any contracts yet with ‘any US law offices’ as the minister ‘is exploring different options during his US visit on how to proceed with this topic’.”
N.B.: In view of the central role that Danske Bank’s Estonian branch played in handling some $234 billion in potentially suspicious transactions, and its ripple effect in the banking sector across Estonia, Denmark, and other countries, it is not surprising that Estonia is interested in sharing in any fines and penalties that may emerge from various investigations into the scandal. Before Minister Helme signs any contracts with U.S. law firms, however, he may want to consider certain factors relevant to Estonia’s chances of sharing substantially in such fines and penalties (if U.S. investigations do result in fines and penalties).
First, in any investigation that the U.S. Department of Justice may conduct into potential international financial crimes, the Department is necessarily dependent on active cooperation from other countries in which evidence or investigative leads may be found. Indeed, it is commonplace, in Justice Department releases announcing prosecutions of such international crimes (such as cyberfraud, financial institution fraud, and Foreign Corrupt Practices Act (FCPA) schemes), to credit foreign law enforcement and regulatory agencies that have assisted the Department in that case.
Second, as a matter of longstanding practice by the Justice Department, a country is not automatically entitled to share in the financial penalties that the Department may obtain in a case merely because some or all of the crimes in a particular scheme occur in that country, or even when that country has offered a measure of assistance to the Department on particular investigative issues or evidence acquisition.
In recent years, the Department has been willing, in major international cases, to partner with other countries’ law enforcement agencies in entering into coordinated criminal resolutions with corporate entities, where the foreign law enforcement agencies receive a substantial portion, even a majority, of the penalties imposed. For example:
- In the Department’s 2016 FCPA resolutions with Brazilian companies Odebrecht and Braskem, the Department agreed that the Brazilian Ministerio Publico Federal (MPF) would receive 80 percent of the $4.5 billion criminal penalty (later reduced) against Odebrecht, with the United States and Switzerland each receiving 10 percent, and that the MPF would receive 70 percent of the $632 million criminal penalty against Braskem, with U.S. and Swiss authorities each receiving 15 percent.
- In the Department’s 2016-2017 FCPA resolution with Rolls-Royce, which it coordinated with the United Kingdom Serious Fraud Office (SFO) and the MPF, Rolls-Royce agreed to pay total criminal penalties of more than $800 million, which included a total fine of nearly $605 million to the United Kingdom, a payment of nearly $170 million to the United States, and a payment of nearly $25.6 million to the MPF.
In both of those cases, however, the foreign law enforcement agencies engaged in long-term and substantial investigations of their own that were closely coordinated with the Justice Department. In the case of Rolls-Royce, the SFO conducted its investigation of Rolls-Royce’s involvement with foreign corruption for more than four years before it entered into a Deferred Prosecution Agreement with the company. In the cases of both Odebrecht and Braskem, those cases stemmed from the MPF’s Operation Lava Jato, which began in 2014. As a general proposition, then, the greater the investment of a foreign country’s prosecutive resources in investigating a complex case and the deeper and longer that country’s commitment to partnering actively with U.S. prosecutors, the stronger that country’s claim can be to share in the total penalties at the end of the case.
Third, Estonia should be mindful that the Justice Department is not the only U.S. agency that may ultimately play a role in any Danske Bank-related financial penalties. Federal regulators such as the Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board, can impose such penalties on banks for Bank Secrecy Act and anti-money laundering violations.
For those reasons, Estonia needs to recognize is that at this stage, it is far too early to expect or assume entitlement to a substantial share of financial penalties that have yet to be negotiated or imposed. While it should feel free to consult with law firms about the U.S. legal landscape, it would be of minimal (if not negative) value to have attorneys lobbying the Department or other agencies on its behalf while those investigations are underway. The best path for Estonia toward the level of future penalties that Minister Helme wants is for Estonian prosecutors and regulators to commit wholeheartedly to working with U.S. authorities and to sustain that commitment all the way to the finish line, whatever that may be.
Dipping Through Geometries 