Following what has been called the largest money-laundering scandal in European history, report raises concerns about bank’s legal and compliance culture.
The chief executive of Denmark’s Danske Bank Thomas F Borgen resigned last week after an internal investigation found ‘major deficiencies’ allowing its Estonian branch to launder over $234 billion in Russian funds. The bank’s internal investigative report into the money laundering flags the legal and compliance functions, and the report found ‘manifestly insufficient and inadequate’ anti-money laundering and risk controls in place from 2007 to 2016. The legal function, termed ‘group legal,’ which the report states provided ‘legal advice and services internally in Danske Bank. The head of group legal reported directly to the ceo until 2012, but from 2013 instead to the chief financial officer (“cfo”), who was member of the executive board. Until September 2014, group legal was responsible for group compliance & AML.’ The bank’s cfo was replaced during the internal investigation.
The report suggested oversight in part was lacking because the Estonian branch was extremely profitable and helped carry Danske Bank through the turbulence of the 2008 world financial crisis and its aftermath. It also stated that the Estonian branch operated culturally separate from the headquarters in Copenhagen, and it had a separate IT system. The 87-page complied by law firm Bruun Hjejle cites multiple examples of problems, including whistleblower complaints, being reported to the Legal or Compliance & AML department which were only half-heartedly examined and dismissed, with self-serving reports being made to upper level management and regulators. The report can be read here.