Compliance Risks Lurk in Denmark’s Financial Institutions

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A recent report by FCG has highlighted the significant compliance risks facing Denmark’s big financial institutions, citing fundamental gaps that need to be addressed in anti-money laundering (AML) efforts.

AML State of Play Report

The report is based on anonymous interviews with senior executives from ten major banks and financial institutions in the country. Despite AML being a top priority for senior management, the report reveals that many institutions are struggling to:

Measure efficiency in transaction monitoring
Set key performance indicators for their overall AML work

Challenges Facing Financial Institutions

The Danish Financial Supervisory Authority (DFSA) reported between 2018-2020 that fundamental aspects of an AML program, including:

Transaction monitoring
Risk assessment
Ongoing due diligence

remained challenging for financial institutions in Denmark.

Over-Investment and Lack of Effectiveness

The report suggests that institutions are over-investing in AML measures due to fear of penalties, but with little evidence of their effectiveness. One anonymous respondent noted:

Despite huge sums of money being invested, there is no evidence that progress has been made in combating financial crime.

Recommendations for Improvement

The findings highlight the need for financial institutions in Denmark to reassess their approach to AML and prioritize more effective measures to combat financial crime. The report’s author, Kenneth Ullman Eenholt, warns:

If people think AML has peaked, they are wrong, and fundamental gaps still need to be closed.

By addressing these compliance risks, financial institutions in Denmark can ensure a stronger defense against financial crime and maintain the trust of their customers and regulators.