Danske charges raise questions on risk of sanctions breach

Bloomberg

As Danske Bank A/S is investigated for money laundering, a key question remains whether it was used by anyone on US sanctions lists.
Denmark’s biggest bank has so far said there’s no evidence sanctions were breached. But it’s also acknowledged that the risk can’t be ruled out. Last week, Danish police filed the first criminal charges against Danske, zeroing in on its failure to screen clients, including those defined as “politically exposed.”
Elliott Stein, a senior analyst in litigation at Bloomberg Intelligence in New York, says the wording of the charge sheet against Danske raises questions about potential sanctions breaches, which US prosecutors have historically viewed particularly severely.
“The bank’s failure to screen against lists of politically exposed persons, which the bank conceded in its September 2018 report, and Danish prosecutors listed in their November 28 charges, raises the risk that bank conducted transactions involving sanctioned individuals or entities,” Stein said in an emailed note.
“As of September 19, however, Danske said it had not uncovered any evidence of any violations of sanctions.”
Danske Chairman Ole Andersen said in September that “at this point, the screening against the sanctioned list has not uncovered any evidence of any violations of the sanctions, but the investigation is still ongoing,” according to the transcript of an analyst call. Andersen has since been ousted by Danske’s biggest shareholder, and will step down in connection with
a shareholder meeting on December 7.
Denmark is the first country to have filed criminal charges against Danske, but investors are most worried about what the US Justice Department might uncover and what sort of fines may follow. The Danish financial regulator has ordered Danske to hold an extra $1.5 billion in capital to serve as a buffer against possible penalties.
Even if Danske wasn’t actively involved in laundering money, its failure to live up to basic compliance requirements may make it culpable, according to lawyers familiar with the subject.
“If you ignore requirements to know your customer, then you risk some very serious consequences for your business,” said Jesper Hjetting, a director at Lundgrens, who specialises in corporate law. Hjetting declined to comment on the Danske case and spoke in general terms.