Danske Bank Agrees to $400 Million Fine for Money Laundering Scheme

Introduction

Danske Bank, the largest bank in Denmark, has pleaded guilty to charges of money laundering and agreed to pay a staggering $400 million fine. The plea follows an investigation into the bank’s involvement in a massive money laundering scheme that took place between 2007 and 2018.

Background

The scheme was discovered in 2013 but wasn’t publicly disclosed until 2018. It involved billions of dollars flowing through Danske Estonia’s branch, with the bank failing to effectively address gaps in its risk management, client onboarding, and transaction monitoring systems despite multiple warnings from regulators, internal auditors, and whistleblowers.

The Scheme

At the heart of the scheme was Danske Estonia’s largest and most profitable business - providing accounts to non-resident customers who acted as a gateway to the international financial system. To facilitate these transactions, the bank set up correspondent banking relationships with at least three US banks.

The scheme involved several critical failures by Danske Bank:

• Multiple false assurances given to respondent banks about the effectiveness of its risk management systems
• Dependence on forms containing false information to carry out due diligence
• Failure to provide a real-time overview of the risk involved in transactions

These failings enabled non-resident customers to do business with minimal due diligence and monitoring, resulting in billions of dollars being laundered through the bank’s accounts.

Consequences

The consequences for correspondent banks were severe. One executive stated that if he had known Danske’s assurances were false, he would have “run to his boss’ door” to notify him.

Implications

The Danske Bank scandal has significant implications for the global correspondent banking system, which relies heavily on manual, questionnaire-based risk management procedures. The bank’s actions demonstrate that financial crime can be actively facilitated through these systems, with limited consequences for perpetrators of crime.

Experts warn that current manual methods are undermining financial institutions and enabling financial crime to continue unchecked. Investment in data-driven financial crime risk management is urgently needed to ensure a safer financial system for all and inject trust back into correspondent banking.

Conclusion

The Danske Bank scandal serves as a stark reminder of the need for robust, technology-driven processes to detect and prevent financial crimes. As the global financial system continues to grapple with the consequences of this major news scandal, it is clear that more must be done to prioritize financial crime risk management and protect the integrity of the financial system.

Recommendations

• Implement data-driven financial crime risk management systems
• Conduct regular audits and reviews to ensure compliance with anti-money laundering regulations
• Provide training for employees on financial crime prevention and detection
• Encourage whistleblower reporting and provide protection for whistleblowers
• Increase transparency and accountability in correspondent banking relationships