New York Regulator Fines Nordea $35 Million for Compliance Failures

The New York Department of Financial Services (DFS) has reached a $35 million settlement with Nordea Bank Abp over serious compliance failures and inadequate due diligence practices. The settlement, announced on August 27, 2024, by DFS Superintendent Adrienne A. Harris, follows an extensive investigation into the bank's role in facilitating potentially illicit financial activities.

The investigation, sparked by the 2016 Panama Papers leak, revealed Nordea's involvement in helping hundreds of customers create tax-sheltered companies using offshore accounts. Further scrutiny uncovered the bank's connections to major money laundering schemes, including the Russian Laundromat, the Azerbaijani Laundromat, and the Hermitage Capital Allegations.

DFS found that Nordea's anti-money laundering (AML) safeguards at its high-risk former Baltic branches were inadequate, leaving the bank vulnerable to suspicious transactions. The investigation also highlighted consistent failures in implementing compliance initiatives and forming relationships with high-risk banking partners, which further exposed the bank to elevated financial crime risks.

Superintendent Harris emphasized the critical nature of robust compliance programs in international financial institutions, stating, "International financial entities such as Nordea must safeguard against criminal activity in the global financial system, and for years Nordea failed in these respects."

The settlement addresses violations of Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements and failures in conducting proper due diligence on correspondent bank partners. Notably, the bank's transaction monitoring system was found to be inadequate, with Nordea itself acknowledging that its overall AML risk was "critical."

This case highlights the ongoing challenges faced by regulatory bodies in combating financial crimes and ensuring compliance within the global banking system. The substantial fine serves as a warning to other financial institutions about the consequences of lax compliance practices and the importance of maintaining stringent safeguards against money laundering and other illicit activities.

As part of the settlement, Nordea Bank Abp has agreed to the terms outlined in a Consent Order with the DFS. This action by New York regulators underscores the state's commitment to maintaining the integrity of its financial system and its role in global efforts to curb financial crimes.

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