Financial Crime World

Title: Norwegian Court Rules in Favor of Edison: A Historic CEO Fraud Case Against Danske Bank

Date: April 24, 2023

Background

  • In a landmark legal decision on April 19, 2023, Borgarting Court of Appeal ruled in favor of Italian energy company Edison.
  • Edison was awarded NOK 39 million in compensatory damages and interest from Danske Bank.
  • The case began with one of Norway’s largest-ever CEO fraud schemes that occurred in 2019.

Details of the Case

Edison’s Norwegian branch was the target of a sophisticated fraud scheme when its managing director received instructions to make payments for an acquisition from individuals posing as the company’s CEO.

  1. The fraudsters managed to convince the managing director to transfer NOK 130 million from Danske Bank to their accounts.
  2. The money was funneled through newly-incorporated companies in Hong Kong.
  3. Edison, which had not previously made any payments to Hong Kong, commenced legal action against Danske Bank.

Court Ruling

The Court of Appeal majority found that Danske Bank breached its obligation to exercise adequate control measures in detecting and preventing fraud:

  1. Despite Edison being exempted from Danske Bank’s automated system, the bank failed to adequately examine transactions.
  2. The bank’s adherence to the Anti-Money Laundering Act was deemed insufficient as they failed to onboard Edison properly and follow up on transactions effectively.

Impact of Edison’s Conduct

Danske Bank’s overall liability was reduced due to Edison’s own conduct.

CEO Fraud: A Growing Threat

  • CEO fraud is a significant concern for companies, especially those with international subsidiaries.
  • Criminals often impersonate senior management via email, telephone, SMS, or similar communication channels to deceive employees and siphon off funds.
  • If undetected, CEO fraud can cause substantial financial damage.

Indicators of CEO Fraud

Typical indicators of CEO fraud include:

  • Lack of payment history to the recipient
  • Urgency to complete transfers
  • Secrecy
  • Multiple payments
  • Transaction recipients in high-risk countries

Hjort’s Long-Standing Expertise in Dispute Resolution

  • Hjort law firm, representing Edison in the legal proceedings, played a pivotal role in the case.
    • The Hjort team led by Nils Christian Langtvedt, Ole Iversen, Johnstad Kalvø, and Øivind K. Foss provided strategic advice at every stage.
  • With a rich history in dispute resolution and litigation since its establishment in 1893, Hjort offers specialized counsel in court and arbitration proceedings.

For further information or assistance, please contact Hjort.