Compliance implications of Danske Bank’s $2B Estonia money laundering settlement

The settlement total of 15.3 billion Danish kroner (U.S. $2.2 billion) is in line with projections the bank included in its interim report for the first nine months of 2022 published in October. Danske Bank fully accepted the regulators’ findings, including pleading guilty to one count of conspiracy to commit bank fraud as part of its resolution with the U.S. Department of Justice (DOJ).

The bank also reached settlements with the U.S. Securities and Exchange Commission (SEC) and Danish Special Crime Unit (SCU).

Over the course of nearly a decade, Danske Bank failed to spot more than $200 billion of dirty money that flowed through its Estonia subsidiary undetected. The funds came from countries including Azerbaijan, Moldova, and Russia. Danske Bank shuttered the branch and all its Baltic operations in 2019 and has invested approximately DKK 12 billion (U.S. $1.7 billion) in improving its anti-financial crime and AML controls over the past four years.

“At Danske Bank, we have taken significant learnings from the regrettable failures of the past,” said Chief Executive Carsten Egeriis in a press release. “Our focus has been on systematically addressing the root causes that led to these unacceptable breaches of everything we want to stand for as a bank. 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.”

Compliance implications: Danske Bank received full credit for cooperation as part of its resolution with the DOJ. The bank “demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct, including by, among other things, providing substantial information from its internal investigation; voluntarily and expediently producing a significant amount of documents located outside the United States in ways that did not implicate foreign data privacy laws; making foreign witnesses available for interviews; collecting and producing voluminous evidence and information including with translations where necessary; and providing detailed analysis of complex, cross-border transactions,” the agency said in a press release.

The bank was placed on probation by the DOJ for three years. It must appoint an independent compliance expert selected by the Danish Financial Supervisory Authority and continue enhancing its compliance programs as part of its plea agreement. The DOJ did not require the bank to retain a compliance monitor.

In response to SEC allegations of misleading investors regarding its AML deficiencies, Danske Bank agreed to pay $413 million as part of a settlement with the agency. The total includes $178.6 million in disgorgement, $55.8 million in prejudgment interest, and a $178.6 million civil penalty.

As part of its agreement with the SCU, Danske Bank said it accepted a fine and confiscation for violations of the Danish AML Act and Danish Financial Business Act.

Further enhancements: Danske Bank said it now has 3,600 full-time employees working to fight financial crime. The bank has overhauled its control framework, implemented mandatory whistleblower training, and added risk management and compliance considerations to the performance agreements of its executive leadership team and relevant senior managers.

“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,” said Martin Blessing, chairman of the bank’s board of directors, in a statement. “We have learnt from our mistakes, and we have taken the steps necessary to ensure that Danske Bank has robust measures in place to do everything possible to prevent these failures taking place again.”