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Nordea Risks $1 Billion Money Laundering Fine, Experts Say

A logo sits on display outside the windows of a Nordea Bank AB office in Copenhagen, Denmark, on Tuesday, March 14, 2017. Denmark has changed the way it conducts monetary policy in response to a 2015 existential crisis, according to Danske Bank A/S, the country’s biggest lender. (Carsten Snejbjerg/Bloomberg)

(Bloomberg) -- Nordea Bank could face an estimated maximum fine of almost $1 billion over alleged failures to stop money laundering if it loses its case with Denmark, according to some legal experts, an amount that would far exceed the lender’s own expectations. 

The case has no precedent but a Danish court might hit the Helsinki, Finland-based bank with a penalty of as much as 6.5 billion Danish kroner ($943 million), said Hans Fogtdal, a lawyer and former deputy public prosecutor at the country’s National Special Crime Unit, or NSK, which is pursuing the case against Nordea. 

Denmark last week charged Nordea with violating the country’s anti-money laundering laws between 2012 and 2015, when it processed more than $3 billion worth of suspicious transactions largely linked to Russian clients. The indictment marks the first time a money-laundering case against a bank goes to court in Denmark, with all previous ones getting settled.

While it’s almost certain that Nordea will be fined, the amount and exact timing is unclear. The bank has set aside just €95 million ($104 million) to cover the penalty, assuming it will be tried under legislation in place when the alleged offenses happened. By contrast, the NSK is expected to bring the case under legislation providing for much larger penalties but enacted at a later date.

“We expect to be fined but we do not agree with the assessment of the authorities,” Nordea spokesman Tuomas Forsell said in emailed comments, referring to the NSK’s indictment. “This is a case going back in some instances more than 10 years, and which is, among other things, now being assessed based on subsequent regulations.”

The NSK declined to comment on the potential fine it will seek from Nordea, but confirmed it disagrees with the bank over its size. 

“It makes sense for the prosecutor to aim for the biggest fine possible” in the Nordea case, said Kalle Johannes Rose, an expert on money laundering at Copenhagen Business School. While it’s a key legal principle to “follow the rules for sentencing that were in force when the offense happened,” Denmark didn’t have clear money-laundering legislation before the 2019 reform, he said. 

New Rules

Following years of money-laundering scandals in Denmark’s banking sector, the country passed new laws effective from 2019 that allow courts to impose a penalty equaling a quarter of the total amount in suspicious transactions passing through any given bank. This means Nordea faces a fine of as much as 6.5 billion kroner based on the 26 billion kroner of potentially tainted money flowing through it, according to Fogtdal. 

The Danish court case comes as various other Nordic banks including Danske Bank and Swedbank are trying to move on from a series of money-laundering scandals that have been hanging over them for almost a decade, long tainting the industry’s image. The affected banks have paid billions of dollars in fines, replaced a series of top managers and spent years fixing their controls. 

Danske settled in late 2022, pleading guilty to all money laundering charges. Among fines it paid to various authorities including the US Department of Justice, the lender agreed to pay 3.5 billion kroner to settle with Danish law enforcement — exactly a quarter of the 14 billion kroner worth of suspicious transactions that Denmark had identified. 

Inadequate Checks

Nordea has been in discussions with Danish authorities for almost nine years about its issues, but unlike other banks, it failed to reach a settlement. The bank is now charged with deficient controls, ignoring alarms and failing to report suspicious money flows to authorities, according to the indictment. 

One key allegation in the NSK’s indictment is that Nordea didn’t run proper checks on money flows totaling 26 billion kroner carried out by just 25 clients, even though they raised classic red flags such as letterbox business addresses and opaque ownership structures. The unredacted client list obtained by Bloomberg News reveals an intricate set-up of entities and people, some previously linked to money laundering and spread across various geographies such as Russia, Malta, Monaco, Panama and the Seychelles. Many of the companies listed have been dissolved.  

Nordea also sold more than €100,000 in €500 bills without running adequate checks on the buyers despite warnings from watchdogs that large banknotes are frequently used for criminal purposes, according to the indictment.

--With assistance from Love Liman and Leo Laikola.

(Updates with details from indictment in 12th paragraph.)

©2024 Bloomberg L.P.

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