Pretty soon Baltic banks might find themselves effectively cut off from the global dollar system, regardless of how stringent their money laundering controls or how spotless their compliance records.

Even banks with no exposure or involvement to Danske Bank’s Estonian branch – the nexus of an unprecedented global money-laundering scheme that went uninterrupted for years – could face collateral damage from the broadening scandal as international regulators look past Danske’s blatant disregard for European anti-money laundering controls and toward the international financial institutions that helped enable them by clearing their transactions: such as US and European megabanks.

International banks like JP Morgan and Deutsche Bank already got burned during the catastrophic banking scandal in Latvia that almost brought down the country’s financial system (the correspondent banks embarked on a wave of “de-risking” after staring down threats from regulators). Now, that scenario is playing out again, but on a much larger scale.

According to Bloomberg, the DOJ has contacted Deutsche Bank AG and Bank of America Corp. to request information about transactions they cleared for the Danish lender’s Estonia branch – the epicenter of what’s believed to be the largest money laundering scandal in European history.

In an internal audit, Danske said that nearly all of $230 billion in non-resident transactions processed by the bank between 2007 and 2015 are suspicious. Amazingly, Russian President Vladimir Putin has appeared in prosecutors’ documents, as investigators in the US and Europe believe that some of the money moved through the branch belonged to the Russian leader and members of his inner circle. Danske’s CEO and its chairman have been forced out over the scandal. And some investors worry that the fallout could cost Denmark its ‘AAA’ credit rating. 

The investigation is still in its infancy, and there are no signs yet as to whether the banks themselves are targets. But the SEC and DOJ are raising questions about whether the banks applied appropriate AML scrutiny to their correspondent businesses.