Roughly six months after Latvia’s third-largest lender, ABLV, was thrust into insolvency following shocking allegations of bribery and money laundering, a similar story is playing out in neighboring Estonia, where the local branch of Danske Banke on Friday revealed that a suspected money laundering scheme is much more serious than investigators had previously realized.

Call it the local Wells Fargo: while initial reports that billions of dollars of illicit funds from shadowy sources in the former Soviet Union had flowed through the branch were largely ignored by the markets, the Wall Street Journal sent shares of Danske bank spiraling lower when it reported that as much as $150 billion was laundered through the bank between 2007 and 2015 – a staggering amount that dwarfs the size of the entire Estonian banking industry. Initial reports from earlier in the year had the suspected illicit funds at $8 billion.

Danske’s loss, along with discouraging reports involving ING (where an internal warning reportedly said its license to operate could be threatened) and the imminent departure of Deutsche Bank’s top shareholder, drove European banks to their lowest level since November 2016.

While Danske is facing investigations by Danish and Estonian authorities, larger European regulators like the FCA have so far declined to get involved, which is perhaps fortunate for the bank’s shareholders. However, the staggering size of the fraud virtually guarantees future action as regulators look to plug what appears to be a gaping hole in the European financial system’s regulatory purview.

Danske’s Estonian branch is the subject of criminal investigations in Denmark and Estonia, prosecutors in the countries said. The Danish Financial Supervisory Authority reprimanded the bank for weak controls in May and ordered Danske to hold about $800 million more in capital, but didn’t issue a fine.

The problems at Danske highlight the growing concern among authorities about how illicit money flows—especially from Russia—are channeled through European-regulated banks to the West.

Shell companies, including many registered in the U.K., controlled most of the accounts in question, and many of the accounts had links to people in Russia and former Soviet Union countries, people familiar with the matter said. The U.K.’s Financial Conduct Authority isn’t probing the bank, according to a person familiar with the matter.

What’s worse, Danske’s leaders resisted doing anything about the suspicious activity until they were forced to when a correspondent bank suddenly refused to do business with their Estonian branch.

At Danske, clients would typically move funds among several companies with accounts at its Estonia branch before transferring the money to accounts in banks in Turkey, Hong Kong, Latvia, the U.K. and other countries, one of the people familiar with the investigation said.

Danske’s management dragged its feet dealing with the issue, according to a report filed by Danish regulators this year, ignoring complaints from correspondent banks and internal whistleblowers. Estonian regulators complained to Danish counterparts as early as 2012 and compiled a 200 page report in 2014 detailing the local branch’s extensive failures to obtain even basic information about the source of its clients’ income.

“There were many red flags,” said Kilvar Kessler, chairman of the management board of the Estonia’s banking supervisor, the Finantsinspektsioon.

It was only after another bank refused to deal with Danske’s Estonian unit that the bank shut down “non resident” Estonian accounts in 2015.

Danske’s CEO was involved in oversight of the Estonian branch and apparently was complicit in the cover-up…which seems to cut against the bank’s claims that the branch operated as an “independent unit”.

Danske Chief Executive Thomas Borgen was in charge of international banking—including in Estonia—during part of the period under investigation. He was promoted to run the bank in 2013. He declined to comment.

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Such large sums were able to slip by European regulators’ watch for years largely because of a series of design flaws in the Continent’s anti-money-laundering systems, said James Oates, the founder of Cicero Capital, a financial adviser in the Estonian capital of Tallinn.

“Everybody was looking the other way because they thought they were covered, and it turns out they weren’t,” said Mr. Oates.

Danske Bank’s Estonia branch isn’t directly supervised by the European Central Bank, which in any case lacks the authority to investigate money-laundering cases. Estonian authorities, meanwhile, say that because Danske operated as a branch—and not a subsidiary with a legal entity based in Estonia—they had limited authority and incomplete information.

Parent bank Danske said in a September 2017 statement that the Estonia branch “operated very much as an independent unit, with its own systems, procedures and culture regarding anti-money-laundering measures.”

And in what can only be described as a profound understatement, Danske Bank Chairman Ole Andersen said in a statement that issues with the bank’s Estonian order book were bigger than the bank realized.

“Any conclusions should be drawn on the basis of verified facts and not fragmented pieces of information taken out of context,” Danske Bank Chairman Ole Andersen said in a statement. “As we have previously communicated, it is clear that the issues related to the portfolio were bigger than we had previously anticipated.” The bank says the results of its probe are being finalized.

Given the scope of the fraud, we imagine this isn’t the last we’ll hear about it in the coming days and weeks; we also imagine that many Russian oligarchs are having sleepless nights as Europe’s noose on their offshore funds is closing slowly but surely.