Denmark Cracks Down on Money Laundering: AML Regulations and Compliance in the Nordic Country

Denmark, known for its prosperity as a Nordic nation, has been under international scrutiny following a series of high-profile money laundering incidents. Notably, suspicious transactions valued around €200 billion passed through some branches of a Danish bank in eastern Europe. This led to criminal charges, investigations, and financial penalties exceeding $2 billion.

In response to these incidents, Danish authorities are strengthening their Anti-Money Laundering (AML) and Counter-financing of Terrorism (CFT) regulations. It is crucial for firms operating in Denmark to understand their obligations and stay updated on evolving AML/CFT regulations.

Denmark’s AML Regulator: Finanstilsynet

The Danish Financial Supervisory Authority (Finanstilsynet), or FSA, serves as Denmark’s primary financial regulator. It was established in 1988 and oversees banks and financial institutions, including insurance companies, pension funds, investment funds, and securities brokers. Its mission is to ensure financial stability and confidence in Danish financial undertakings. The FSA is responsible for AML/CFT compliance, setting rules and best practices, collaborating on new legislation, and offering periodic guidance.

Denmark’s AML Regulations

The primary AML legislation in Denmark is the Money Laundering Act. All financial institutions in Denmark must adhere to this legislation. It requires implementing risk-based AML/CFT solutions, along with appropriate customer due diligence and screening measures. Designating a specific AML Officer to ensure adherence to these regulations is crucial.

Denmark is an EU member and continually updates the Money Laundering Act in compliance with EU anti-money laundering directives. The most recent amendments were made for the Fourth and Fifth Anti-Money Laundering Directives. Denmark is not currently implementing the EU’s Sixth Anti-Money Laundering Directive, but it has expressed interest in addressing virtual asset money laundering risks.

Recent Initiatives

The Danish government has declared a nationwide crackdown on money laundering, focusing on areas of particularly high financial risk, such as high-value goods, money transfer companies, cryptocurrencies, and the gambling industry. To combat money laundering, the Danish police have established a dedicated unit.

Although Denmark has not made any official commitments, the FSA has announced plans to consider AML/CFT measures for virtual assets in the future. The EU’s proposed regulation, MiCA (Markets in Crypto Assets), coming into effect in 2024, will introduce new AML/CFT compliance requirements for selected types of virtual assets. The Danish government’s stance on implementing MiCA remains unclear.

Complying with Denmark’s AML Regulations

In accordance with EU and FATF guidelines, Danish firms must employ risk-based AML/CFT solutions. This involves:

Customer due diligence: Identify and assess customers’ risk profiles; conduct enhanced due diligence for higher risks and UBO checks for corporate entities.
Transaction screening: Evaluate transactions for signs of laundering and other financial crimes, scrutinizing high counterparty risk and high-risk jurisdictions.
Sanctions and watchlists: Monitor and screen customers against international sanctions and watchlists.
Adverse media screening: Use technology to search for customer names in news sources, minimizing false positives and administrative noise. The Finanstilsynet guidelines emphasize the importance of media screening within customer due diligence.

Screening technology, such as Ripjar’s Labyrinth Screening platform, can significantly help firms meet their compliance obligations. This technology enables global customer screening across thousands of sources, providing real-time accurate data and employing advanced AI and machine learning to construct effective customer risk profiles and respond to emerging threats promptly.