Thursday, February 25, 2021

EU Doesn’t Prosecute for Money Laundering, Financing of Terrorism and Corruption

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Recent AML Scandals Erupting in Europe

In the past year, several high-profile international money laundering schemes have rocked the EU and caused it to re-examine how to prevent and address money laundering in the future. We will note some of them here; we do not purport to provide a full inventory of these emerging scandals.

The highest-profile of these scandals is undoubtedly the colossal Danske Bank scandal: in the fall of 2018, an internal investigation revealed that Danske Bank processed approximately $234 billion in suspicious transactions by thousands of non-resident customers from 2007 to 2015. According to this report, the Estonian Danske Bank branch failed to implement adequate AML procedures and the parent Danske Bank Group failed to detect and address numerous red flags. Recent European reports have stated that Danish prosecutors charged several former Danske Bank employees in sealed indictments for breaching the country’s money laundering laws. Reports indicate that individuals charged include: (1) Thomas Borgen, Danske’s former CEO; (2) Henrik Ramlau-Hansen, the bank’s former financial director and, until recently, Denmark’s Chair of the Financial Supervisory Authority; (3) Lars Morch, a member of Danske’s executive board and head of business banking; and (4) Flemming Pristed, former Group General Counsel. But these prosecutions appear to be an exception to the EU norm – focusing on addressing systemic vulnerabilities rather than rooting out the money launderers themselves.

Moreover, it appears that authorities have not charged any of the bank’s former customers. Allegedly, the misconduct is attributable primarily to a series of already-identified U.K. and Russian shell companies which held accounts set up through the single Estonian branch. Consequently, identifying at least some of the alleged criminals who laundered their considerable sums of dirty funds through this branch presumably would be possible.

One example of this phenomenon is the scandal concerning Dutch bank ING N.V. which, in September 2018, agreed to pay a record $899.8 million fine for failing to detect and address money laundering and other criminal activities using the bank’s accounts. Dutch prosecutors claimed that from 2010 to 2016, ING’s Netherlands branch failed to sufficiently implement the Dutch Anti-Money Laundering and Counter-Terrorism Financing Act because the bank failed to respond to known weaknesses in customer due diligence policies and to report suspicious transactions. Notably, Dutch authorities did not prosecute any individuals employed by the bank, nor anyone associated with the underlying criminality.

In yet another Nordic scandal, Swedish public television reported this year that Stockholm-based Swedbank, which is the largest bank operating in Estonia, purportedly processed gross transactions of up to $22 billion per year from 2010 to 2016 through Estonia and from high-risk residents primarily from Russia. As we previously blogged, financial supervisory authorities from Sweden, Estonia and Denmark announced that they were opening investigations into the bank and working with authorities in Lithuania, Latvia and Estonia to trace the Danske Bank transactions. The Swedish Financial Supervisory Authority, which plans to publish the conclusions of its probe into alleged money laundering in the Baltics, recently announced that its report will not be published until the beginning of next year. Just today, Swedbank issued a press release stating that it has answered questions posed to it by the Financial Supervisory Authorities in both Sweden and Estonia, and admitting that the bank’s AML program has had, and still has, “certain shortcomings.”

Further examples are possible but unnecessary. The clear question is, what can be done going forward?

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