Danish banking giant Danske Bank is paying US$2 billion in a settlement with U.S. and Danish authorities over deficiencies in its anti-money laundering efforts that allowed risky clients entry into the U.S. financial system.
In a global settlement with regulators and law enforcement, the bank agreed to pay penalties and disgorgement to resolve allegations that it allowed high-risk customers, including foreign clients based Russia, to access the U.S. financial system through its branch in Estonia, which had weak AML controls.
According to the U.S. Department of Justice (DoJ), the bank attracted offshore customers “by ensuring that they could transfer large amounts of money through Danske Bank Estonia with little, if any, oversight.” The bank’s employees also conspired to obscure the origin of their funds by funnelling them through shell companies, the DoJ added.
“By at least February 2014, as a result of internal audits, information from regulators, and an internal whistleblower, Danske Bank knew that some [foreign] customers were engaged in highly suspicious and potentially criminal transactions, including transactions through U.S. banks,” the DoJ said, noting that the bank also knew that the Estonian division’s AML procedures did not meet its standards.
In settling with U.S. authorities, the bank agreed to plead guilty to conspiracy to commit to bank fraud.
It also entered a settlement with the U.S. Securities and Exchange Commission (SEC), which will see the bank pay US$413 million in penalties, disgorgement and prejudgement interest to resolve allegations that it misled investors by failing to disclose the deficiencies in its AML controls. The SEC sanctions are included in the US$2 billion total.
In addition to the settlements with U.S. authorities, the bank settled with the Danish special crime unit and is paying 4.75 billion Danish krone as part of the global resolution.
The DoJ noted that the bank received full credit for cooperation and has enhanced its AML compliance program.
“The resolutions mark the end of the investigations into Danske Bank by U.S. and Danish authorities. We have cooperated since we were approached by the authorities and accept the terms of the resolutions,” said Martin Blessing, chairman of the bank’s board in a statement. “We offer our unreserved apology and take full responsibility for the unacceptable failures and misconduct of the past, which have no place at Danske Bank today.”
The bank noted that it shut down its operations in the Baltic region and in Russia in 2019, and has since invested approximately DKK 12 billion (approximately €1.6 billion) to improve its financial crime risk management framework, including its AML controls.
“We have made significant investments in building systems and upgrading our compliance, risk and control capabilities, and we are actively nurturing a culture under which employees can speak up if they see actions that may not meet our standards,” said Carsten Egeriis, CEO of Danske Bank.