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Abu Dhabi, UAEMonday 22 October 2018

Denmark's Danske Bank could face $630 million fine

The penalty would mark a Danish record for such cases if the bank is found guilty of money laundering

Danske Bank headquarters in Copenhagen, Denmark. The bank is at the centre of a major money laundering scandal with as much as $234bn flowing through a tiny unit in Estonia. Bloomberg
Danske Bank headquarters in Copenhagen, Denmark. The bank is at the centre of a major money laundering scandal with as much as $234bn flowing through a tiny unit in Estonia. Bloomberg

Denmark’s government says Danske Bank is potentially facing a fine as big as 4 billion kroner, or about $630 million (Dh2.3bn), if found guilty for its role in one of Europe’s biggest money laundering scandals.

The penalty would mark a Danish record for such cases. What’s more, it doesn’t take into account potential fines that might be levied elsewhere. Bloomberg Intelligence estimates Danske may have to pay more than 1 billion euros ($1.2 billion) in total, while a Bloomberg News survey points to about $800 million, roughly matching the amount that Deutsche Bank and ING Groep paid for similar misdeeds.

Speculation about a fine follows a series of stunning announcements by Denmark’s biggest bank on Wednesday, including the resignation of its chief executive officer, Thomas Borgen, and the admission that as much as $234bn flowed through its tiny Estonian unit between 2007 and 2015. Chairman Ole Andersen said that a “large” chunk of that amount may need to be treated as “suspicious”, as Danske’s laundering scandal deepens.

Rasmus Jarlov, Denmark’s business minister and the man in charge of overseeing financial legislation in Danske’s home market, said the $630m estimate is based on an assumption that the bank’s profits from transactions tainted by laundering amount to about 1.5bn kroner. That’s what Danske says it earned at the Estonian unit at the center of the case, and what the bank has earmarked for “donation” to society.

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The minister has already made clear he thinks the evidence suggests that “illegal acts” were committed in connection with Danske’s laundering case. He’s also pointed out that Danske’s report is by no means the final word, as criminal investigations into the bank are ongoing in Denmark and Estonia.

The Danish Financial Supervisory Authority said on Wednesday it was “investigating” whether the latest revelations warrant new steps against Danske, after adding a 5 billion-krone capital penalty in May.

Meanwhile, Danish lawmakers agreed to add 700 per cent to the existing limit on fines for money laundering, though the new rule won’t be made retroactive. The money laundering case has jolted Danish politicians into action, with parliament demonstrating a rare moment of unity in wanting to impose tougher laws on banks.

Asked whether the US is looking at the Danske case, Mr Jarlov said, “We’re aware that foreign authorities are monitoring Danish banks and could open cases.”

“But that just makes it even more important that we handle things thoroughly in Denmark, to make sure nobody elsewhere is left with the impression that we’re not coming down severely on this,” he said.

Jeppe Kofod, who is a member of the European parliament, where he is a spokesman for the chamber’s committee on tax evasion and money laundering, said it’s clear the US is looking at the Danske case.

“I was in the US in July and spoke with the Treasury Department and there is no doubt that they also follow the Danske Bank case closely,” Mr Kofod said in an interview. “This case is far from finished, it has just begun.”

The Danske scandal may become a watershed moment as Europe wakes up to the laundering risks festering in its own backyard. The Danish bank is just the latest big European financial firm to have its reputation marred by association with dirty money, following similar cases at Deutsche and ING.

According to Bill Browder, the founder and CEO of Hermitage Capital and the author of a criminal complaint against Danske, the revelations around the bank “put into question the entire anti-money laundering system across Europe, from law enforcement to regulatory to the people in Danske Bank”.

Mr Browder says the string of recent cases means there’s now “huge political pressure in the EU to grow some teeth” in terms of enforcing tougher rules and penalties. He also says the Danske case is likely to drag on for a very long time.