Former Deutsche Bank Executive Reveals Hiring Plans for Danske

(Bloomberg) -- About two months after Danske Bank A/S exposed to the world the vast scale of its money laundering scandal, it brought in an executive from Deutsche Bank AG to help it deal with the fallout.

Philippe Vollot, who started in late 2018 as Danske’s head of compliance after years of leading Deutsche’s global crime prevention unit, says he’s been told to “do what it takes” to overhaul Danske’s operations. That was “the mandate I got from the board of directors,” according to the 52-year-old Frenchman, who began his career as legal counsel at France’s market regulator.

Vollot’s mandate includes adding to a compliance department that’s already doubled in size over the past two years to about 1,700 people, he said in an interview.

In the half year Vollot has been working at Danske, he’s carved out units for financial crime as well as surveillance and investigations. He said it soon became “obvious” to him that, in order to succeed, the bank needed “more people who really have seen it all.”

Morgan Stanley Hire

With that in mind, Vollot is targeting people with long careers in fighting white-collar crime. This month, he hired a former London-based managing director at Morgan Stanley, Satnam Lehal, to lead Danske’s financial crime unit. While at Morgan Stanley, Lehal was responsible for preventing financial crime in the bank’s operations across Europe, the Middle East, Africa and Asia.

“Satnam is the first visible recruitment I am making, but I have already signed -- and I am on the way to signing -- a dozen additional subject-matter experts,” Vollot said. “I need people with 15 years of expertise in these specific areas, and it ranges from transaction monitoring and trade surveillance to risk assessment.”

The environment Vollot wants to create is a far cry from the culture that Danske’s executive suite once nurtured. Back then, the mantra was “execute,” best personified by its former CEO, Thomas Borgen. That culture helped drive record profits. But the financial regulator also identified Danske’s culture as a key weakness that helped explain its laundering scandal.

Who’s to Blame?

A minister from Estonia’s ruling coalition has accused past governing parties, including one that’s currently in power, of allowing dirty cash to flow through the country’s banks in one of Europe’s largest money-laundering scandals.

The focus was on carrying out orders, not questioning them, the financial regulator said last year. Borgen, who once led the Baltic operations at the center of the laundering saga, has since had preliminary charges brought against him by police for his role in the case. Danske announced on May 10 it had replaced Borgen with Chris Vogelzang, a 56-year-old Dutchman and veteran of ABN Amro.

Vollot says it’s now clear that banks need to be a lot more discerning. “It is not just a question of controls,” but of “making sure, is it the right deal to do? Is it the right client to on-board? Is it the right transaction to put through the system?”

Customer Flight

Danske’s customers have shown they are ready to leave if the bank doesn’t break with its past behavior. So far, around 20,000 retail clients in Denmark have walked out. Vogelzang said last week that the “trust issues” still surrounding the bank mean more might follow.

The laundering crisis has also driven shareholders away. Danske’s market value plunged almost 50% last year, as the bank admitted that a large part of about $230 billion that flowed through a non-resident Estonian unit was probably suspicious. The regulator mused how it was possible that no one at Danske questioned the outsized profits coming from a tiny Baltic unit, with returns in one year alone exceeding 400%.

There’s much talk in the financial industry of figuring out how to make better use of artificial intelligence to help fight money laundering. But Vollot says Danske will have to invest in people until the “technology kicks in.”

Danske plans to spend around $300 million on technology over the next three years to stop laundering. The bank’s costs in the first quarter rose 9%, in part because of investments in anti-laundering measures.

“The bank had already made progress before I joined,” Vollot said. “I am pushing very hard so that we make even more progress and that we address our challenges in even a quicker way. But it always takes a few years to come to maturity.”

©2019 Bloomberg L.P.