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14th Dec 2018

Danish bank faces criminal charges in test of EU system

  • The bank referred 42 employees to the police (Photo: Ross G. Strachan)

Danish prosecutors have filed criminal charges against the country's biggest bank, but it remains to be seen if any individuals will face justice for the biggest money-laundering scandal in EU history.

Sleuths had enough material to charge Danske Bank with violation of the country's anti-money laundering act in a move which could cost the bank hundreds of millions of euros in fines, the Danish State Prosecutor for Serious Economic and International Crime (SOIK) said on Wednesday (28 November).

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"There's a very large ... amount of material to investigate, but we have advanced far enough to file a case against the bank," SOIK head Morten Niels Jakobsen said.

Danske Bank has admitted to handling around €200bn of "suspicious" money, mostly from Russia, via its Estonian branch, between 2007 and 2015 despite multiple warnings from an internal whistleblower and from Estonian, US, and Russian authorities.

It has referred 42 employees to Danish police. Its CEO, Thomas Borgen, resigned over the affair and its chairman, Ole Andersen, has signalled he will also step down.

But the SOIK made clear in a statement that its charges concern the company only, while a "second track" of the investigation has yet to determine if there is enough evidence of "personal liability" to also take action "against individuals in Danske Bank's management".

Jesper Nielsen, the bank's acting CEO, said in a statement the bank had "expected" the SOIK move.

"It's in our interest that the case is examined from top to bottom," he added, pledging full "cooperation", as the lender tries to rebuild its reputation.

The SOIK highlighted that it was working with Estonian prosecutors via a "joint investigation team" created under the banner of Eurojust, an EU judicial agency in The Hague.

The Danske Bank affair, which also involved German lender Deutsche Bank and two US banks, JP Morgan and Bank of America, has prompted the European Commission to table new anti-money laundering laws in a test of the bloc's ability to regulate the banking sector.

It saw justice commissioner Vera Joureva, ask the European Banking Authority (EBA), an EU agency in London, to probe whether the national Danish financial watchdog did its job properly.

It also prompted the European Central Bank (ECB) in Frankfurt to create a new anti-money laundering (AML) taskforce inside the Single Supervisory Mechanism (SSM) - an ECB offshoot, also in Frankfurt, in which national regulators meet to exchange information.

"The AML Office will set up and chair 'an AML Network' among Joint Supervisory Teams in charge of the banks whose business model leads to a high level of money laundering risks," the ECB's chief supervisor, Daniele Nouy, told MEPs in a hearing on Danske Bank last week.

The ECB, earlier this year, withdrew the banking licence of Pilatus Bank in Malta and helped force ABVL, a Latvian lender, out of business over corruption allegations.

But these were small fry compared to Danske Bank, which has holdings worth 140 percent of the Danish GDP.

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