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Danish financial regulator doesn't punish Danske for money laundering in Estonia

TALLINN – The Financial Supervision Authority (FSA) of Denmark has decided not to punish Danske Bank for enabling money laundering via its Estonian branch, but has issued eight orders and eight reprimands to Danske Bank.  

"The Danish FSA has assessed the role of Danske Bank's management and senior employees in the matter relating to the now closed down non-resident portfolio at Danske Bank's branch in Estonia. The assessment gives rise to eight orders and eight reprimands. Danske Bank has taken note of the orders and reprimands. In addition to the initiatives already taken in recent years, Danske Bank will now launch further measures to ensure that it complies with all orders," Danske said in a disclosure to the stock exchange.

By its decision dated May 3, the Danish FSA issued eight orders mainly having to do with improving internal control and ensuring compliance with valid requirements. The FSA also ordered the board of directors and the executive board of Danske to ensure that the bank provides adequate information to the Danish FSA, as well as to strengthen their governance in order to ensure sufficient involvement in written replies to enquiries from the Danish FSA to the board of directors or the executive board.

In the eight reprimands, the FSA reprimanded the bank's executive board for not performing its responsibilities to a sufficient extent when it failed to ensure sufficient focus on anti money laundering (AML) measures for high-risk customers at the branch in Estonia and monitoring of the branch at Business Banking in Copenhagen, failed to ensure adequate follow-up on allegations made by a whistleblower, failed to ensure that the Danish FSA was informed of the matter until January 2015, and failed to adequately notify the board of directors of the severity of the case and ensure a prompt close down of the part of the non-resident portfolio that related to customers who did not have personal or business-related links to the Baltic countries.

It also issued a reprimand in respect of the bank not replacing the management in Estonia until more than one and a half years after the whistleblower report.

"We take the criticism expressed by the FSA very seriously," said Thomas F. Borgen, CEO of Danske Bank. "We agree that we should have understood the depth and scope of the problems in Estonia at an earlier stage and should have reacted faster and more forcefully."

"As the FSA also states, we have strengthened our AML efforts in recent years. Today, Danske Bank has more than 900 employees working to combat financial crime," the CEO said.   

The Estonian branch of Danske Bank has been implicated in large-scale money laundering. The Estonian FSA conducted inspections in the Estonian branch of Danske Bank in 2014, during which the authority identified extensive, long-term and systematic violations of norms concerning the blocking money laundering. The authority also determined that Danske had not sufficiently analyzed its client, Lantana Trade LLP.

The Danish financial supervision authority conducted last year an inquiry to see whether Danske Bank was observing anti-money laundering rules and found that the bank's branch in Estonia had not taken on time measures to reduce the risk of money laundering. The financial regulator gave the bank a reprimand for not having identified and taken measures to reduce significant money laundering risks in its Estonian branch.

Danske Bank in September expanded its ongoing investigation into the customers and transactions of its Estonian branch from 2007 to 2015 and hired Jens Madsen, the former head of Denmark's intelligence agency and fraud squad, to help the bank in its effort to investigate a possible case of money laundering in the Estonian branch of the bank.

The bank in October was placed under investigation by the High Court of Paris in relation to suspicions of money laundering concerning transactions carried out by customers of Danske Bank Estonia from 2008 to 2011. According to the Danish daily Berlingske, the investigation launched by the French authorities is linked to the case of Russian lawyer Sergei Magnitsky.

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