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Lessons learned from Danske Bank’s $2 billion penalty

Danske bank is a global financial institution headquartered in Denmark.

Danske Bank A/S agreed to forfeit $2 billion to resolve the United States’ investigation into Danske Bank’s fraud on U.S. banks regarding the activities conducted by its Estonian branch during 2008-2016.

Some important points from the announcement of the US Department of justice:

“Danske Bank defrauded U.S. banks regarding Danske Bank Estonia’s customers and anti-money laundering controls to facilitate access to the U.S. financial system for Danske Bank Estonia’s high-risk customers who resided outside Estonia – including in Russia.”

“Danske Bank lied to U.S. banks about its deficient anti-money laundering systems, inadequate transaction monitoring capabilities, and its high-risk, offshore customer base in order to gain unlawful access to the U.S. financial system,”

“For years, Danske Bank lied and deceived U.S. banks to pump billions of dollars of suspicious and criminal funds through the U.S. financial system,”

See announcement here: https://www.justice.gov/opa/pr/danske-bank-pleads-guilty-fraud-us-banks-multi-billion-dollar-scheme-access-us-financial

⚡ In 2007, Danske bank took over Sampo AS in Estonia and established the Danske Bank Estonian branch.

⚡Between 2008 and 2016, Danske bank offered banking services through its branch in Estonia, including non-resident customers.

⚡Danske Bank Estonian branch transferred large amounts of money on behalf of its non-resident clients with little to no oversight.

⚡Bank employees conspired with non-resident customers to conceal the true nature of their transactions, including with the use of shell companies.

⚡The branch relied on US banks to access the US financial system and conduct USD transactions.

⚡By at least 2014, Danske Bank knew that some of its non-resident clients were engaged in highly suspicious and potentially criminal transactions, including transactions through US banks.

⚡Instead of providing US banks with truthful information, Danske Bank lied about the state of Danske Bank Estonian’s AML program, including transaction monitoring capabilities.

⚡Bank will also enter into separate criminal or civil resolutions with domestic and foreign authorities.

Lessons learned:

🔍 The AML program is a must for all regulated entities.

🔍 CDD should not be a “checklist” activity. Entities must really understand their customers and their activities.

🔍 Screening against Politically Exposed Persons (PEPs) and sanctions list should be conducted in all cases.

🔍 Transaction monitoring is mandatory to comply with AML requirements.

🔍 Beneficial owners should always be identified.

🔍 Source of funds and source of wealth must always be established in the case of high-risk customers.

🔍 Regulated entities must ensure that the funds involved in a business relationship or transactions are not the proceeds of crime.

🔍 Wilful blindness is a crime. #amlcft #moneylaundering #aml #financialcrime

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