OUR THOUGHTS ON:

Danske Bank Money Laundering Scandal Fallout

Business Advisors|Fraud/Investigative & Forensic Accounting

By Kevin Baker

On September 19, 2018, Thomas Borgen, CEO of the Estonian Branch of Danske Bank since 2013, resigned amidst potentially the largest money laundering scandal in European history.  Danske Bank’s Chairman, Ole Anderson followed suit and stepped down from his position on November 6, 2018.  This comes after an agreement between Danske and several of its major shareholders that “extraordinary and extensive changes” are required at the bank.

In 2007, Danske Bank purchased the As Sampo Bank and, as a result, entered the Baltic market for the first time. Consequently, Danske Bank inherited As Sampo Bank’s customers. From 2007-2015, there were over 9.5 million payment transactions, totaling upwards of $236 billion, many of which appeared to be suspicious in nature. After examination, investigators deemed 6,200 of the total 15,000 foreign customer accounts of the Estonian bank branch to be suspicious – including accounts linked to the Russian Laundromat and Azerbaijani Laundromat scandals.  Further, there were 42 employees and agents of the bank who seemed to be involved in the suspicious activity.

Following Danske’s entrance into the Baltic market in 2007, Estonian financial regulators issued a critical inspection report of the bank. The Russian Central Bank provided information pointing to possible tax and customs evasion as well as money laundering to Danish financial regulators, who then reiterated this to key members of the Danske Bank. However, no action was taken as a result of the report. Further, in 2008 Danske Bank Group elected against migrating Baltic banking activities onto the primary IT platform due to the related costs and resources. Therefore, the bank did not benefit from anti-money laundering procedures that likely contributed to the inability to detect the schemes that took place during the nine-year period.  In addition, in 2014, before a business review could be completed, a whistleblower within the Estonian branch, as well as the results of an internal audit, highlighted anti-money laundering control deficiencies. Again, while action was prompted, these allegations and findings were not investigated.

Danske Bank’s stock has fallen by 30% in 2018 and nearly 50% from an all-time high in May of 2017. Penalties and potential criminal charges remain likely. The United Kingdom has announced an investigation into U.K.-registered companies involved in the laundering, and the United States could open up an investigation regarding the violation of U.S. sanctions. The effects of this scandal will not be reflected in just monetary value from penalties imposed or loss of market value, but will also be reflected in the loss of customers going forward.

If you need assistance with assessing or responding to fraud within your organization please contact Joel Rosenthal at 412.697.5387 or jrosenthal@schneiderdowns.com or Kevin Begley at 412.697.5165 or kbegley@schneiderdowns.com. For similar articles, visit the Our Thoughts On blog.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

comments