Danske CEO apologises as money laundering scandal explodes

Bloomberg

The chief executive officer of Danske Bank A/S has apologized for management’s failure to prevent criminals from using his firm to launder billions of dollars in illicit funds over several years.
The apology follows an unusually harshly worded public reprimand by the financial regulator. The Danish government said management’s failings were “unforgivable” and the central bank warned that the reputation of the whole country was at risk.
“I’m very sorry on behalf of all stakeholders,” Danske CEO Thomas Borgen said in a phone interview. He also said the bank is “in a very different place today” with considerably more focus on preventing money laundering.
The Danish Financial Supervisory Authority said that Danske’s management failed on multiple counts to act in compliance with the rules.
The assessment followed reports by the Berlingske newspaper that Danske was used as a laundromat by criminals, including entities with ties to Russian President Vladimir Putin, the Russian security service, FSB, as well as members of the Azeri regime. The money laundering, alleged to have taken place between 2010 to 2014, was done via Danske’s operations in Estonia, which have since been terminated.
“It’s no doubt that we should have understood the depth and the breadth of the issues in Estonia better, faster than we did,” Borgen said. The regulator said the failures have led to reputational damage not only for Denmark’s biggest lender but for the entire financial sector of its home country.
“This was a massive failure for years,” Jesper Berg, the director general of the Financial Supervisory Authority in Copenhagen, said in a phone interview. The failures penetrated all levels of the organisation — across the executive and supervisory board — and reflected “a cultural issue of not bringing problems up through the system,” he said.
Danske was handed a list of orders and reprimands by the FSA, including a requirement that it hold additional capital. Danske has until June 30 to show how it will comply.
The regulator stopped short of demanding that actions be brought against members of Danske’s current management team but signaled that decision wasn’t necessarily final.
Berg said the FSA didn’t find “sufficient evidence that, if we believe there were a court case, that we could win the court case, and that is the requirement for us.” “If there’s new information that justifies bringing a court case or reporting to the police, then we will revisit these decisions,” Berg said.
Henrik Ramlau-Hansen, a former chief financial officer at Danske who became chairman of the board of the Danish regulator, is stepping down to ensure there are no conflict-of-interest issues at the FSA. “I acknowledge my share of responsibility,” he said.
Borgen, 54, acknowledged that the bank failed to act fast enough as the problems emerged. But he repeatedly made clear his job isn’t on the line. Chairman Ole Andersen told local newswire Ritzau he still has confidence in the CEO.
“As the CEO, you are ultimately responsible,” Borgen said. “That’s a fact. It’s important to learn from this case and ensure it won’t happen again. With the support of the board, that’s my task going forward.”