Danske Bank Resolves French Money Laundering Case with €6.33 Million Settlement

Danske Bank, Denmark's largest bank, has reached a settlement with the French National Financial Prosecutor, agreeing to pay €6.33 million to resolve a money laundering investigation linked to its former Estonia branch. This marks the conclusion of France’s judicial probe into the non-resident portfolio (NRP) at the Estonian branch, a scandal that has haunted the bank since 2007. The French investigation was centered around transactions from 2007 to 2014 involving several thousand non-resident customers, primarily from Russia.

Danske Bank acquired the Estonian subsidiary of Sampo Bank in 2007. This acquisition integrated the NRP into Danske Bank’s operations, and the Estonian branch maintained its own customer management system and IT platform. However, it became a hub for high-risk customers residing outside Estonia, particularly in jurisdictions like Russia, where transactions often involved shell companies, complex financial arrangements, and minimal regulatory oversight. By 2016, the NRP was shuttered, but by then, it had already become the epicenter of a significant money laundering scandal.

The French investigation was triggered in 2014 after suspicious activity involving a French import-export company, Decobat, was flagged by TRACFIN, France’s financial intelligence unit. Decobat’s managing director, referred to as Mrs. X, was found to have funneled funds through opaque accounts at Danske Bank’s Estonian branch, enabling her to evade taxes and customs duties. These transactions were part of a larger scheme involving concealed profits from export activities to Russia, routed through accounts in Luxembourg, the British Virgin Islands, and other offshore havens.

The judicial investigation, initiated in 2015, revealed a troubling lack of due diligence at Danske Bank’s Estonian branch. Accounts opened remotely, minimal know-your-customer (KYC) procedures, and the involvement of unregulated financial intermediaries were among the compliance failures. Shell companies like Argenta Systems Ltd and Maycroft United LLP were used to channel illicit funds, enabling Mrs. X to commit offenses of tax fraud and money laundering. In January 2024, Mrs. X was ultimately convicted in France through a guilty plea.

Implications of the Settlement
While Danske Bank has faced numerous regulatory and legal challenges over its Estonian operations, this resolution with the French authorities marks the final investigation into the bank’s involvement in the scandal. Earlier, Danske Bank had settled with Danish and U.S. authorities in December 2022, agreeing to pay fines amounting to over €4.7 billion for failing to comply with anti-money laundering and anti-terrorism financing obligations.

Niels Heering, Senior General Counsel at Danske Bank, expressed relief at the resolution, stating, “We are pleased to have reached this resolution with the French National Financial Prosecutor to settle the final investigation into the bank by any authority related to the non-resident portfolio at Danske Bank’s former Estonia branch.”

Despite the fine, the bank had already provisioned for the financial impact, minimizing any further disruptions. The settlement extinguishes any further prosecution of Danske Bank under French law for these matters, effectively closing the chapter on one of Europe’s largest money laundering cases in recent history.

In response to these investigations, Danske Bank has implemented significant reforms to bolster its compliance framework, particularly in the areas of anti-financial crime and anti-money laundering (AML). The bank has strengthened its internal controls and risk management protocols, and external oversight is now in place to ensure compliance with global regulatory standards. These reforms have been crucial in rebuilding trust with regulators, stakeholders, and the broader banking community following the scandal.

The settlement with France brings some measure of closure to a case that has reverberated through the European financial sector, serving as a stark reminder of the need for robust compliance and oversight in cross-border banking activities.

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