Financial Crime World

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Technical Cross-Default Triggered by Change of Control Leads to Fit and Proper Approval Requirement

A recent development in Denmark’s financial sector has highlighted the importance of complying with regulatory requirements following a change of control at a bank.

When there is a change of control at a bank, the new acquirer must be deemed “fit and proper” by the Danish Financial Services Authority (FSA). This requirement is triggered by an acquisition of a “qualifying interest”, which is defined in section 2.3 of the relevant regulations.

Additional Approval Requirements

Furthermore, if the shareholding or other interests are subsequently increased to 20%, 33% or 50% of the bank, or if the bank becomes a subsidiary of the acquirer, an additional “fit and proper” approval requirement is triggered.

Consumer Protection

In Denmark, banks are required to treat all customers fairly, including consumers. This general principle is supplemented by specific requirements depending on the business area, such as consumer credit and financial services.

  • Acceptance of guarantees from non-commercial customers, including consumers and private individuals, is specifically regulated in the Financial Business Act.
  • Banks must provide fair treatment to all customers, with specific requirements for consumer protection in certain areas.

Deposit Protection

Ordinary deposits in Denmark are covered by the Danish Guarantee Fund for Depositors and Investors up to EUR 100,000 per customer. Certain other types of deposits, such as those related to real estate, are also protected up to EUR 10,000,000.

Data Security and Cybersecurity

Danish banks are subject to the General Data Protection Regulation (GDPR) and the Danish Act on Data Protection, which supplements the GDPR.

  • The Danish financial sector has invested heavily in providing a secure and efficient IT infrastructure.
  • Adoption of digital signatures and electronic transactions has increased significantly.
  • Banks must apply the NemID solution for online banking and other services to provide a common secure login.

Financial Crime and Banking Secrecy

Danish banks are subject to provisions governing money laundering and financing of terrorism, including the Consolidated Act on Measures to Prevent Money Laundering and Financing of Terrorism.

  • Banks must assess the risk of being used for financial crime and implement appropriate risk management procedures.
  • Banking secrecy applies in Denmark, but there are certain exemptions and overriding provisions of law.

Competition

The Danish banking sector is concentrated, with a few banks having a dominant position. However, so far, there have been no specific concerns or issues identified.

Recovery, Resolution, and Liquidation

In the event of bank failure in Denmark, recovery plans must be prepared and maintained by the bank, which must include a range of recovery models that can be implemented if the bank becomes distressed.

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