Danske Bank A/S is headquartered in Copenhagen and is Denmark’s largest bank. It operates principally across the Nordic region and also maintains international operations. The US Department of Justice expressly described Danske Bank as the largest bank in Denmark.
Background
Danske Bank provides an exceptionally strong comparison with BCCI because this was not merely a regulatory settlement or an allegation of inadequate controls.
The bank itself pleaded guilty to a criminal offence.
The case arose principally from the activities of Danske Bank’s Estonian branch and its high-risk Non-Resident Portfolio, which served substantial numbers of customers from outside Estonia, including customers from Russia and other former Soviet states.
The US authorities concluded that Danske Bank had misled US correspondent banks about the nature of these customers, the risks associated with the portfolio and the adequacy of its anti-money-laundering controls.
Scale of the Transactions
The scale was extraordinary.
Between 2008 and 2016, approximately US$160 billion was processed through US banks on behalf of customers in Danske Bank Estonia’s Non-Resident Portfolio.
The Justice Department stated that Danske Bank had misrepresented or concealed important information concerning:
- the identity and risk profile of customers;
- the effectiveness of its AML controls;
- its transaction-monitoring capabilities; and
- the true risks associated with the Estonian non-resident business.
By at least 2014, internal audits, regulatory information and a whistleblower had raised serious concerns about the portfolio and the effectiveness of the Bank’s controls.
The significance of the US$160 billion figure should be stated carefully. It does not mean that every transaction represented criminal proceeds. It demonstrates the enormous volume of business processed through US correspondent banks while material information about the underlying portfolio and its AML risks was being withheld or misrepresented.
Guilty Plea
In December 2022, Danske Bank pleaded guilty to one count of conspiracy to commit bank fraud.
Under the plea agreement, it agreed to criminal forfeiture of approximately US$2.059 billion, with the Department of Justice agreeing to credit approximately US$850 million in payments made under coordinated resolutions with Danish authorities and the US Securities and Exchange Commission.
This was therefore an actual corporate criminal guilty plea, not merely a regulatory criticism or an unresolved allegation.
Institutional Outcome
Despite the scale of the conduct and the criminal guilty plea, Danske Bank continued operating.
The response included:
- corporate criminal accountability;
- forfeiture and substantial financial penalties;
- major changes to AML and compliance controls;
- continuing regulatory supervision; and
- extensive remediation of the affected business and systems.
The legitimate banking franchise survived.
Indeed, Danske Bank remains Denmark’s largest bank and continues to operate across its principal markets.
Comparison with BCCI
Danske Bank demonstrates particularly clearly that criminal liability of a bank can be distinguished from the question of whether the entire banking institution should cease to exist.
That distinction is central to the BCCI debate.
If particular BCCI executives, customers, accounts or operations were involved in criminal activity, those individuals and transactions could be investigated, prosecuted and isolated.
It does not necessarily follow that the much larger body of legitimate banking operations, thousands of employees and ordinary customer relationships throughout the BCCI Group also had to disappear.
In Danske Bank’s case, prosecutors established serious institutional wrongdoing and obtained a corporate guilty plea. Yet the regulatory response still distinguished between:
criminal conduct and institutional responsibility and the continuing viability of legitimate banking operations.
The Double-Standards Question
If Denmark’s largest bank could plead guilty to a criminal conspiracy arising from serious misconduct involving its Estonian non-resident business, after approximately US$160 billion had been processed through US banks on behalf of that portfolio, and nevertheless continue operating under strengthened controls, why did allegations of money laundering and wrongdoing within parts of BCCI contribute to the closure of the institution as a whole?
A further question follows:
If an actual corporate criminal guilty plea did not establish that Danske Bank was incapable of rehabilitation, why were allegations concerning particular executives, accounts and transactions within BCCI allowed to support a portrayal of the entire institution as incapable of reform?
The comparison does not suggest that the circumstances of Danske Bank and BCCI were identical.
It raises a narrower question of regulatory principle:
Why was prosecution, remediation and preservation considered an acceptable response to serious institutional wrongdoing at Danske Bank, while comparable emphasis was not placed on separating wrongdoing within BCCI from its wider legitimate and viable banking operations?
Also read:
- US Department of Justice, “Danske Bank Pleads Guilty to Fraud on U.S. Banks in Multi-Billion Dollar Scheme”, 13 December 2022. The principal official account of the guilty plea, US$160 billion transaction figure and US$2.059 billion forfeiture.
- US Attorney’s Office, Southern District of New York, “Danske Bank Pleads Guilty to Fraud on U.S. Banks in Multi-Billion Dollar Scheme to Access the U.S. Financial System”, 13 December 2022. Provides further detail on the Estonian Non-Resident Portfolio and the misrepresentations made to US correspondent banks.
