Danke Bank Faces Devastating SEC Charges for Deceiving Investors on Anti-Money Laundering Compliance Lapses in Estonia

The bank has agreed to pay over $400 million to settle SEC charges

Fraud charges were brought against Danske Bank, a multinational financial services corporation with its headquarters in Denmark, by the Securities and Exchange Commission (SEC) today. The SEC alleges that the bank misled investors about its anti-money laundering (AML) compliance program in its Estonian branch and failed to disclose the risks that were posed by the program’s significant deficiencies. In order to resolve the allegations brought forward by the SEC, Danske Bank has consented to pay $413 million.

According to the complaint filed by the SEC, Danske Bank knew or should have known that a substantial portion of its Estonian branch’s customers were engaging in transactions that had a high risk of involving money laundering; that its internal risk management procedures were inadequate to prevent such activity; and that its AML and Know-Your-Customer procedures were not being followed and did not comply with applicable laws and rules when it acquired its Estonian branch in 2007.

The SEC claims that from 2009 to 2016, these high-risk customers, none of whom were residents of Estonia, used Danske’s services to conduct billions of dollars worth of suspicious transactions through the United States and other countries, thereby generating as much as 99 percent of the Estonian branch’s profits. The SEC’s allegations are based on the fact that none of these high-risk customers were residents of Estonia.

The bank has agreed to pay over $400 million to settle SEC charges

The complaint further alleges that although Danske was aware of the high-risk transactions, it made materially misleading statements and omissions in its publicly available reports stating that it complied with its AML obligations and that it had effectively managed its AML risks. This is despite the fact that Danske Bank was aware of the high-risk transactions. Shares of Danske Bank experienced a precipitous decline as the full scope of the bank’s anti-money laundering (AML) failures became apparent.

Investors are the ones who get to decide how much of a risk they want to take on, and corporations that raise money from the public are required to disclose information that is material to investors. According to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, “That is the basic bargain of our securities laws, and it extends to foreign issuers like Danske Bank, which sought to access our capital markets, even though its securities were not registered with the Commission.”

This was said in reference to the fact that Danske Bank attempted to access our capital markets despite the fact that its securities had not been registered with the Commission. However, as alleged in our complaint, Danske Bank repeatedly breached that bargain by falsely representing to its shareholders, including investors from the United States, that it had strong anti-money laundering controls while concealing its significant control deficiencies and compliance failures.”

The complaint filed by the SEC alleges that Danske Bank violated the provisions of the Securities Exchange Act of 1934 pertaining to the prevention of fraud. The SEC has presented Danske Bank with an offer to settle the charges against it in exchange for the bank’s consent to the entry of a final judgment in U.S. District Court permanently enjoining it from future violations and ordering it to pay $178.6 million in disgorgement, $55.8 million in prejudgment interest, and $178.6 million in a civil penalty.

Danske Bank has offered to settle the charges by consenting to the entry of a final judgment in U.S. The disgorgement and prejudgment interest will be deemed by the SEC to have been satisfied by the forfeiture and confiscation that was ordered in the parallel criminal cases.

As part of an integrated and global resolution with the SEC, the Department of Justice, the United States Attorney’s Office for the Southern District of New York, and Denmark’s Special Crime Unit, Danske Bank has agreed to pay more than $2 billion.

Jennifer Moore was in charge of the investigation that was conducted by the SEC, and Tanya Beard and Tracy Combs of the Salt Lake Regional Office were in charge of supervising it.

For more posts by NfoNews, click here.

Leave a Reply

Your email address will not be published.