Today it was reported that Danske Bank should still be able to hit its common equity tier 1 ratio (CET1) targets even if the fine it receives following the recent money laundering scandal was in the region of $3.3 billion. This is encouraging for Danske Bank shareholders but should also serve as a powerful reminder to other banks in a less robust financial position that the cost of non-compliance with anti-money laundering requirements is often significantly more than the cost of compliance - not all banks could survive a penalty of this magnitude.
It also shines a spotlight once again, on the importance of robust and effective KYC processes which is a fundamental baseline requirement for effective anti-financial crime controls.
One further reminder worth highlighting is that in Clyde & Co's recent analysis of the lessons learned from OFAC sanction violation settlements, over one-third of all the cases examined involved penalties imposed on the parent organisation resulting from activities of its subsidiaries or affiliates, suggesting that the importance of knowing exactly what is happening in subsidiaries or affiliates, particularly in global organisations cannot be overstated.
Banks with concerns about the effectiveness of their AML controls should take notice, there are plenty lessons out there to learn from.
Authorities in Estonia, Denmark, France and the U.S. are investigating the Danish lender for its involvement in a money-laundering scandal in which €200 billion of nonresident money flowed through the bank's Estonian branch from 2007 to 2015, of which a "significant" part was found to be suspicious, according to an internal probe in 2018. Fine estimates made by analysts in recent months range from 4 billion kroner to 20 billion kroner.