Danske executives to be held accountable as probe deepens

Bloomberg

Denmark’s financial supervisor plans to hold board members of Danske Bank A/S personally accountable if the lender is again caught misleading authorities.
“Their heads are on the block,” Jesper Berg, director general of the Financial Supervisory Authority, said in an interview as his office resumes an investigation into Denmark’s biggest bank.
Danske has admitted that a tiny Estonian unit may have been used to launder a “large” part of about $234 billion between 2007 and 2015. Criminal investigations into the bank are under way in Denmark and Estonia, and US and UK authorities are looking at the case. Chief Executive Officer Thomas Borgen, 54, has resigned and Chairman Ole Andersen says that several employees have been reported to the police.
Andersen, 62, said this week he also considered resigning because of the laundering scandal, but that he decided to stay on, for now, to deal with the “task” at hand. The remarks, made in connection with Danske’s internal report on the laundering case, show the extent to which some of the titans of Denmark’s financial establishment have had their reputations tainted by the scandal.
Twelve people sit on Danske’s board of directors, including Vice Chairman Carol Sergeant, whose career spans posts including chief risk officer at Lloyds Banking Group Plc, as well as regulatory roles in the UK.
Berg is under pressure to show that regulators are on top of the Danske case. The agency opened an inquiry last year, but only after Danish newspaper Berlingske reported the suspicious flows at Danske’s Estonian unit. That inquiry, concluded in May, found that Danske had repeatedly misled both Danish and Estonian authorities, and resulted in an $800 million capital penalty.
Berg says the agency will go through the material gathered by Danske’s attorneys over the coming months and compare it to evidence the FSA has, to determine whether new disciplinary measures should be taken against the bank.
The FSA in May demanded that all members of Danske’s supervisory and executive boards “sign off” on the information provided to the agency.
Berg said that should serve as an incentive to ensure all future communication with the agency is timely, thorough and accurate. If not, “then we have to rely on the huge consequences it has if the information isn’t sufficiently diligently delivered to us.”
The scandal has prompted Danish legislators to come up with tougher laws, including raising the cap on bank fines by 700 percent. Across Europe, lawmakers are waking up to the dangers of money laundering in their own backyard and trying to figure out how to improve the region’s defense. Danske is just the latest in a string of recent financial crime cases that has included Deutsche Bank AG and ING Groep NV.
Berg said his agency is hampered by limited resources. Danske said this week it spent $32 million on its report and expects to spend more as it continues to review the accounts of 8,800 customers.
That is “well above 50 percent of my budget, and I have other tasks,” Berg said.
Denmark’s government has already said that Danske may face a fine as high as $630 million, under the country’s bank laws. The figure doesn’t take into account what may apply under other jurisdictions.
The Danish FSA has already imposed a capital penalty of 5 billion kroner, or close to $800 million, on Danske.