Danske Bank no longer under AML investigation in France

Chris Hamblin

31 January 2018

On 11 October 2017, Danske Bank A/S, which has a sizeable private banking arm, was placed under formal investigation ("mise en examen") by Tribunal de Grade Instance de Paris (a French court) in relation to suspicions of money laundering concerning transactions carried out by customers of Danske Bank Estonia between 2008 and 2011. The French court has now changed the status of Danske Bank in the investigation to that of an assisted witness ("témoin assisté"). This means that Danske Bank is no longer under formal investigation.

At the time, Flemming Pristed, the group's general counsel, explained: "The investigation refers to...transactions in the amount of around €15 million, which were transferred to France during 2008-2011 by former customers at Danske Bank Estonia. The customers were part of the portfolio of foreign customers at Danske Bank Estonia (non-resident customers), and we have since then terminated all accounts in that portfolio."

Major deficiencies in controls and governance made it possible for Russians to use Danske Bank’s branch in Estonia for criminal activities such as money laundering, according to an 'analysis' of the situation at the Estonian branch conducted at Danske Bank’s request by Promontory Financial Group, a regulatory consulting firm, in September.

According to the bank, the analysis pointed to the following three major deficiencies.

The absence of a proper culture that was capable of looking at and dealing with money-laundering problems at the Estonian branch. The branch also failed to pay enough attention to having the necessary controls and continual monitoring operations, thereby failing to spot the laundering at an early stage. The bank admits that management at the branch was 'inadequate.'
Inadequate governance in relation to compliance and risk. The group's executive board and its main board of directors based their risk assessments on reporting from the Estonian control functions, compliance officers and internal auditors, which "did not have a satisfactory degree of independence from the local organisation." Danske Bank’s cross-organisational risk assessment methods were held to be not strong enough.
A high dependency of management follow-up and control were on Estonian management. The branch in Estonia, acquired as part of the purchase of Sampo Bank in 2007, operated very much as an independent unit with its own systems, procedures and culture regarding anti-money laundering measures - a recipe for disaster.

On a matter than may or may not be related to the investigation, Danske Bank was recently implicated in the 'Azerbaijani laundromat' débâcle, itself involving Estonia.