Billions of Dollars Laundered Through U.K. Partnerships Highlights Need for Better Whistleblowing Law (1)

–A fast climate transition needs strong whistleblower protection

By Mathew Carr

March 23-24, 2023 — The $230 billion of suspicious transactions laundered through U.K. limited liability partnerships in the Danske Bank scandal highlights the need for better whistleblowing law in Britain, according to a key whistleblowing lawyer and an important opposition member of parliament.

Limited liability partnerships (LLPs) allow for a partnership structure where each partner’s liabilities are limited to the amount they put into the business.

The Danske Bank fraud “is one of the most disgraceful money laundering schemes ever, they say the largest,” said Steve Kohn, partner of Washington law firm Kohn, Kohn & Colapinto and chairman of the National Whistleblower Center.

The laundering, cited Thursday afternoon in parliament as one of many examples that show the need for better British whistleblower protection, probably helped underpin the Russian invasion of Ukraine, and British regulators should have spotted it earlier because the firms were in “plain sight,” Kohn said.

Three months ago, the lender pleaded guilty to bank-fraud conspiracy and agreed to forfeit $2 billion as part of an agreement with the United States to settle a long-running investigation involving billions of dollars in illicit payments, Reuters reported. The accord with the US Justice Department marked the first time the United States has taken action against Denmark’s biggest bank. The fallout continues.

Uncovering the scandal stemmed from whistleblowing — it’s just one of hundreds of examples.

“You must put it context. Putin’s family used it (the Danske money laundering scheme), the FSB, the (Russian) secret police, used it,” Kohn said Wednesday in a meeting for the Whistleblowing Awareness Week conference. He gave me permission to publish his comments.

“If you have $230 billion, probably all the big oligarchs used it — illegal money laundering,” he said.

“As my whistleblower pointed out, every single penny of that money-laundering money that he uncovered came from UK LLPs that were in plain sight and should have been tackled years before the massive corruption that clearly fuelled what we see in Ukraine today.

The thing that’s beautiful about the American system is our prosecutors are willing to go against big fraudsters from big companies and many people don’t. They go after small people. The average award for false claims is only $1.5 million.”

I have sought comment from the UK Financial Conduct Authority on whether it missed opportunities to highlight and prevent the laundering.

Kohn made his comments as the Bank of England governor Andrew Bailey said the bank warned the U.S. about the fragility of Silicon Valley Bank in the 18 months to 2 years before the lender’s March 10 closure (according to the Financial Times).

Kohn was backed up the following day, Thursday, by Seema Malhotra, the Labour party shadow minister for business. See the full debate on Whistleblowing Awareness Week here. It’s worth the long read.

“The National Crime Agency estimates that fraud costs the UK economy £190 billion each year, including £40 billion to the public sector. Between 43% and 47% of serious economic crimes are exposed by whistleblowers. The numbers show the huge scale of the issue, the huge role that whistleblowers play in exposing economic crime, and the impact they could have on our economy, if they were granted more protection under legislation,” she said.

“One example is the Danske Bank money laundering scheme, where criminals took advantage of UK limited liability partnerships. It was a whistleblower that exposed the $230 billion economic crime operation, halting a stream of Russian money laundering.

“That is why better protection of whistleblowers is so important—because, in so many cases, they are the first line of defence. They deserve greater legal protections than they currently receive. Multiple Ministers have promised us that change is coming, but that is not a message currently commanding the greatest of confidence. The (Business and Trade) Minister is likely to say that he is reviewing the whistleblowing framework and moving forward as soon as possible. That is an area on which we have common ground.”


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