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Nordic financial market watchdogs are losing patience with banks in the region over weaknesses in their anti money-laundering (AML) detection and suspicious transaction reporting IT capacities.
Banks, including Nordea, Danske Bank and DNB, have all been notified of flaws in their AML IT-infrastructure and directed to implement measures to upgrade detection and reporting capacities.
For their part, the Nordic financial supervisory authorities (FSA) have deepened collaboration and cross-border information sharing on money laundering (ML) threats.
Moreover, all four national FSAs are conducting more regular on-site “compliance audits” linked to evaluating the operational effectiveness of IT hardware and software used by banks to monitor, detect and report suspect ML-transactions to authorities.
Closer scrutiny of banks by the Nordic FSAs has accelerated in the wake of high profile ML-scandals affecting Danske Bank and Nordea Bank Danmark. Both banks are being investigated by Statsadvokaten for Særlig Økonomisk og International Kriminalitet (SØIK), the Danish public prosecutor for serious economic and international crime, for suspected AML violations.
The investigation is focused on the laundering of monies, involving some 1,500 separate transactions, through the Moldova-based Moldindconbank between 2011 and 2014.
The SØIK suspects that more than DKK7bn (€940m), after following a circuitous route via Moldova and Latvia, ended up in accounts held with Danske Bank Estonia and Nordea Bank in Denmark.
Some 95% of all transactions under investigation were transferred to accounts at Danske Bank Estonia. These accounts, the SØIK believes, were operated by dubious off-the-shelf companies with addresses in tax havens such as Panama and the Seychelles.
“Banks need to assume a greater role in combating money-laundering. They need to invest more in IT and surveillance technologies to counter money-laundering by criminal gangs and potentially terrorist organisations too. There also needs to be heavier punishments for money-laundering crimes,” said Brian Mikkelsen, Denmark’s Minister of industry, business and financial affairs.
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Danske Bank continues to strengthen its AML-dedicated IT-systems and infrastructure, said Flemming Pristed, the bank’s general counsel.
However, Danske Bank Estonia has again found itself in the legal spotlight in France. The Tribunal de Grande Instance de Paris has charged Danske Bank in connection with suspicious ML-transactions routed through Danske Bank Estonia in the period 2008-2011.
Danish and French investigators suspect that a number of the ML-transactions involved the flow of money connected to Russian arms deals and suspicious money transfers by officials close to Azerbaijan’s ruling government.
“The French investigation is linked to Danske Bank Estonia, and concerns transactions amounting to around €15m, which were transferred to France by former customers of Danske Bank Estonia between 2008 and 2011,” said Pristed.
Danske Bank and Nordea are not the only big Nordic banks under the glare of the AML-IT deficit spotlight. Norway’s FSA (Finanstilsynet), in a report released in September, castigated DNB Bank for not fully complying with AML-laws and for failing to “operate a well-functioning electronic monitoring system” capable of tracking, detecting and preventing ML-transactions mounted by both criminal organisations and groups connected to the financing of terrorist activities.
DNB is taking the FSA’s criticism “very seriously”, said group spokesman Thomas Midteide. The bank, he said, is running a new project to upgrade capacities by installing the latest in AML-IT surveillance and detection systems and transaction tracking and analysis technologies.