Fraud Spotlight: Money Laundering
On December 13, 2022, Danske Bank, Denmark’s largest bank, plead guilty to one count of conspiracy to commit bank fraud and agreed to forfeit $2 billion to settle a long-running investigation involving billions of dollars in illicit transactions. Under the plea agreement, the bank will also be placed on probation for three years.
The Copenhagen-based bank came under investigation in 2018 shortly after it disclosed that more than $200 billion of largely illicit funds had flowed from Russia and other former Soviet states through its Estonia branch. In court filings, the bank admitted to defrauding U.S banks between 2008 and 2016. The Estonia branch, now closed, funneled approximately $236 billion in funds from high-risk clients in Russia and other countries through the U.S. financial system.
Dankse Bank: Estonia Branch
Dankse Bank Estonia created a lucrative business line serving non-resident customers known as the NRP. According to prosecutors, the Estonia branch enticed clients by telling them they could transfer large amounts of money with little, if any, oversight through the Non-Resident Customer (NRP) program. The United States Department of Justice (DOJ) also revealed that the bank’s employees conspired with NRP customers and worked to hide the illicit transactions by using shell corporations to obscure ownership of the funds.
As a result, Russian clients and other high-risk clients were able to gain access to U.S. banks and pump billions of dollars of suspicious and criminal funds through the U.S. financial system. Danske Bank Estonia collectively processed approximately $160 billion through U.S. banks.
As a result of internal audits, information from regulators, and an internal whistleblower, Danske Bank became aware of the Estonia branch’s highly suspicious and potentially criminal transactions by at least February 2014. Danske Bank was also aware that its Estonia branch lacked adequate controls for anti-money laundering and didn’t meet its standards.
According to the DOJ, instead of providing truthful information, Danske Bank lied to U.S. banks about its weak anti-money laundering systems, inadequate monitoring capabilities, and its high- risk, offshore customer base to gain access to the U.S. financial system.
Plea Agreements and Settlements
Danske Bank has accepted responsibility for defrauding U.S. financial institutions and for funneling billions of dollars in suspicious, illicit transactions through the United States. As a part of their guilty plea, Danske Bank will forfeit over $2 billion and implement significant changes to its compliance program and anti-money laundering controls.
In addition to its criminal plea and settlement with the DOJ, the bank has also coordinated settlements with the U.S. Securities and Exchange Commission (SEC) and with Denmark’s Special Crime Unit. The SEC’S complaint specifically charges Danske Bank with violating the antifraud provisions of the Securities Exchange Act of 1934.
The DOJ has said it will credit the $850 million needed to resolve the SEC and Danish probes, and as a result, Danske Bank will pay $1.2 billion to the U.S. Department of Justice.
The Investigation Continues
As of December 2022, no individuals have been charged. However, according to the Justice Department, the investigation is continuing. In a phone interview with Reuters, the Assistant United States Attorney General for the DOJ, Kenneth Polite stated: “Focusing on individual accountability is always a priority, not just for this case, but for all of our corporate resolutions.”
The plea agreement with the DOJ marks the first time the United States has taken action against Denmark’s biggest bank in what has now become one of the world’s largest money laundering scandals. Polite told Reuters that the Danske case is now one of the top five largest financial institution resolutions the DOJ has reached in the last decade.
To read the U.S. Department of Justices’ official press release about the money laundering scheme, click here.
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