Danske Watchdog May Bypass Courts as Money Laundering Fines Soar
(Bloomberg) -- Denmark plans to let its financial watchdog impose fines without going via the courts, in order to speed up the process of punishing banks involved in money laundering.
The decision, which still needs to be debated in the country’s parliament, is the latest step being pushed by Business Minister Rasmus Jarlov as he responds to a $230 billion dirty money scandal that has engulfed Danske Bank A/S and raised questions about Denmark’s reputation as a corruption-free nation.
“The public would like to see swift action,” Jarlov said in an interview in Copenhagen. “There’s a lot of anger in the public for a good reason. I’m very angry about it myself.”
Danske, whose assets are equal to roughly 1 1/2 times Denmark’s gross domestic product, admitted last year that a large part of about $230 billion that flowed through an Estonian unit until 2015 was suspicious in origin. Last month, it emerged that other banks may also have been involved in the case, with allegations being raised against Swedbank AB, a Swedish lender that dominates the Baltic region’s financial markets.
The widening scandal means more banks will probably need to set aside funds to absorb fines and related costs, the European Banking Authority said in December.
Last year, Denmark raised the maximum fine for money laundering by 700 percent to 30 billion kroner ($4.5 billion) in response to the Danske case. To be sure, that law won’t retroactively apply to the bank, which is being probed in Denmark, Estonia and France. Even so, Danske faces a substantial penalty given a separate criminal investigation in the U.S.
As Denmark learns from the Danske scandal, Jarlov hinted at limited political patience for a lengthy court case.
“Now, it has to go through the courts and it takes a long time,” he said. Giving the FSA the power to hand out penalties directly “would mean it would be quicker. They wouldn’t have to go through a court case before they could hand out a fine. Of course, it would require that they’re sure about what happened, and there’d also be a possibility for the banks to appeal.’’
Efforts to strengthen the Financial Supervisory Authority in Copenhagen come amid an investigation by the European Banking Authority into how the FSAs of Denmark and Estonia handled the Danske case, including whether the two agencies made proper use of available sanctions.
Jarlov says the disincentives against money laundering to date clearly haven’t been big enough.
“We’re tightening on almost every aspect that we’ve been able to think of,” he said. “It is important that punishment is handed out quicker than we can do in these cases.’’
The banks themselves would also prefer swift action, according to Jarlov. Under the current system, getting “final verdicts” can take years because cases are “so big and complicated.”
Another area under consideration is extending the statute of limitations so that crimes committed long ago can still be prosecuted today.
That’s a step that Bill Browder says he would welcome. The Hermitage Capital Management co-founder has spent years trying to chase Russian money launderers, and has filed criminal complaints against Danske, Swedbank and others. A very early filing against Danske was rejected by the Danish authorities on the grounds that it went back too far in time.
“Right now, it takes the money launderers one week to launder the money; it takes money launderer investigators 10 years to put together a case,” Browder said in an interview with Bloomberg Television.
“We’re talking about millions of transactions and millions of documents and emails that need to be looked through,” Jarlov said. In a case like Danske’s, which dates back to 2007, there’s a risk that the banks and their employees can’t be convicted, he said.
“And of course,” he said, “that’s unsatisfactory for one’s sense of justice.”
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