Danske Bank Pleads Guilty to US Fraud, Will Forfeit $2B

Danske Bank A/S admitted to fraud and will pay $2 billion to end a long-running U.S. probe into money laundering at its Estonia branch, helping draw a line under the worst scandal in the bank’s recent history.

The Danish lender pleaded guilty Tuesday to conspiring to commit bank fraud and admitted providing banking services to suspicious customers, including in Russia, through its Estonian branch, despite knowing of the money laundering risks, the U.S. Justice Department said in a statement.

Danske is working to move past a scandal that wiped out top management and saw thousands of customers leave in one of Denmark’s worst ever cases of corporate malfeasance. The case has left a scar on a country more known for financial transparency, adding to a list of northern European lenders including ABN Amro Bank NV and Deutsche Bank AG, that have been ensnared in money laundering issues.

“The settlement is wrapping up in a case that has taken up a lot of resources and it will allow the bank’s management to focus on developing the actual business,” said Jens Munch Holst, chief executive officer at AkademikerPension, a Danish pension fund with about $20 billion in assets. “It will be a long, long hard slog to restore the reputation to the level it was before 2018.”

The scandal was unveiled by an overlooked whistleblower in Danske’s Estonian branch who contacted Danish media to reveal that the bank had ignored signs indicating “potentially criminal transactions” to move billions of dollars to the West from 2008 to 2017, including from Russian customers, the Justice Department said. Danske Bank said in 2018 that it failed to adequately screen 200 billion Euros ($213 billion) in non-resident cash.

“For years, Danske Bank lied and deceived U.S. banks to pump billions of dollars of suspicious and criminal funds through the U.S. financial system,” Manhattan U.S. Attorney Damian Williams said. The largest bank in Denmark “deliberately disregarded U.S. law” and “facilitated the laundering of criminal and suspicious proceeds” through the U.S. financial system, he said.

The scandal isn’t the worst crisis ever to hit Danske Bank. In the 1920s, its rapid expansion ended in near-collapse with the Danish state coming to the rescue. The CEO back then, Emil Glueckstadt, ended up in jail for downplaying the extent of the bank’s woes. He died in custody pending trial, and much of his estate was used to cover the court expenses relating to the scandal.

The amount of the fine matches the provisions Danske has set aside to cover the case, most recently in October, when it said it was closing in on agreeing to a $2 billion fine. The Copenhagen-based lender said it will pay the U.S. Justice Department $1.21 billion, the SEC $179 million and the Danish Special Crime Unit 4.75 billion kroner ($679 million).

While the Danske case was one of the highest-profile cases to embroil a European bank in recent years, it’s far from being the only one. ABN Amro in 2021 agreed to pay 480 million euros to end a Dutch investigation that found “serious shortcomings” in its processes to combat money laundering. Earlier this year, Deutsche Bank’s offices in Frankfurt were searched by law enforcement authorities over reports about potential money laundering that were filed by the lender.

“The resolutions mark the end of the investigations by U.S. and Danish authorities,” Martin Blessing, Danske’s chairman, said in a statement. “We have cooperated since we were approached by the authorities and accept the terms of the resolutions.”

Chris Dolmetsch and Christian Wienberg report for Bloomberg News.

Copyright 2022 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.