Translation from original text in Danish. In case of discrepancies, the Danish version prevails.
As stated by the Danish FSA in its decision of 3 May 2018 concerning the management aspects of the Estonia case, the bank’s investigations may bring forward new information which may lead to new assessments and supervisory reactions. This also applies in general to new information appearing in another way.
“This is a very serious matter, and we are continually considering whether new information will make us reconsider the decision made in May. We will now examine the bank’s investigation carefully in this respect,” says Jesper Berg, Director General of the Danish FSA.
“If we assess that there is a need for a new decision, the case will be resumed and treated by the Governing Board of the FSA. A new decision will be published,” says Jesper Berg.
“As appears from our decision from May, the Danish FSA has several times followed up on the information received from the Estonian authorities concerning prevention of money laundering in the Estonian branch. In these cases, the bank has given the FSA satisfactory explanations which have subsequently turned out to be misleading,” says Jesper Berg.
“Our decision from 3 May was based on extensive material obtained from Danske Bank. The various issues described in the press up till the publication of Danske Bank’s report can be found, directly or indirectly, in our decision,” says Jesper Berg.
Further work in the FSA
Like the decision of 3 May 2018, the further assessment of the case by the FSA will focus on the management aspects in relation to the rules of the financial regulation concerning management and control as well as other relevant Danish regulation.
The Danish FSA is in close dialogue with the Estonian FSA, Finantsinspektioon, about the Danish FSA’s follow-up on the case and about the supervisory work of Finantsinspektioon in respect of the money laundering legislation in Estonia, cf. the joint statement of 28 May 2018 from the two authorities.
In Denmark, SØIK (the Public Prosecutor for Serious Economic and International Crime) has commenced a criminal investigation against Danske Bank in respect of possible violations of the money laundering legislation. In its investigation, SØIK involves information and material from the Danish FSA.
Moreover, the Danish FSA expects soon to be able to conclude on the bank’s response in respect of its actions to meet the orders from the decision of 3 May 2018.
Danske Bank’s investigation of the branch in Estonia was prepared at the bank’s own initiative and is therefore not the result of requirements in the financial legislation or of an order from the FSA. Therefore, the FSA must not approve the investigation, but may use the material in its own further assessment of the matter.
However, it is a requirement under the European money laundering regulation that banks ensure complete reporting of suspicious transactions to the financial intelligence units in the countries where the transactions have taken place.
Facts regarding the FSA’s decision of 3 May 2018
On 3 May 2018, the FSA published its decision in respect of Danske Bank’s management and control relating to the money laundering issues in the Estonian branch. Danske Bank received a total of eight orders and eight reprimands. It appeared from the decision that the FSA considered the following issues especially criticisable:
- That in the Estonian branch there were so many shortcomings in all three defence lines that it was possible for customers to use the branch for crimes involving large amounts.
- That it was not until September 2017 that the bank took initiative to investigate the scope of suspicious transactions and customer relations.
- That, except for discontinuation of cooperation with Russian intermediaries, the bank postponed the decision to close down the part of the non-resident portfolio where the customers had no personal or business relation with the Baltic countries until January 2017, and that the close-down was not completed until January 2016.
- That the bank’s governance did not ensure that the problems relating to the non-resident portfolio were sufficiently identified and satisfactorily handled, including through reporting of suspicion of criminal activity to the relevant authorities.
- That the bank did not inform the FSA about the problems ascertained with the measures to present money laundering although, from the beginning of 2014, it should have been obvious for some managers and other senior employees that the information from the bank in 2012 and 2013 to the Danish and Estonian financial supervisory authorities had been misleading.
- That the bank’s information to the FSA since the beginning of 2017 had been insufficient.
It moreover appeared that at least four members of the bank’s management board, the head of Business Banking and the bank’s CRO, CFO and CEO, had separately received information about problems in Estonia, and also that it was not only a question of shortcomings in processes, but that there were also suspicious customers. A review in the branch was initiated of the knowledge of the customers and their activities, but the branch’s own follow-up proved insufficient. For instance, the bank did not ensure adequate investigation of the extent of suspicious transactions and customer relations as a consequence of the insufficient handling of AML in the branch in order to limit the damage from these and make reports to the authorities, nor in connection with the investigation by the consulting firm in February – April 2014.