Estonian financial supervision authority rejects blame in Danske case

Danske Bank is or has been under investigation in a number of countries for its involvement in a major money laundering scandal. Source: Reuters/Scanpix

The Estonian Financial Supervision Authority (FI) disagrees with claims made by its Danish counterpart in a report concerning the Danske Bank money laundering case. In the report, the Danish authority says that its role in the case was limited to "combining the information received from the FI with overall supervision over Danske Bank". The lead role in anti-money laundering efforts concerning Danske was and still is with the Danish supervision agency, the FI insists.

"In the summary of the report in English, several claims and opinions are presented which the FI does not agree with on the basis of both legal and factual circumstances," the FI said on Thursday.

FI: Further red flags should have gone up in Denmark

Where the Danish Financial Supervisory Authority (DFSA) says in its report that in the Danske case they met all their obligations in the field of anti-money laundering, and that their role only lay in combining the information received from the FI with overall supervision over Danske Bank, according to the FI an investigation of the scope of that of Danske should have raised suspicions in the DFSA.

According to the FI, the income from Danske Estonia's non-resident business was not proportional to the size of that specific business line within the bank, and should have raised additional red flags.

The FI also believes that bank governance should be designed, built and run "as a single whole that covers all the parts of a bank and all its risk, including control and governance arrangements for anti-money laundering (AML) and for combating the financing of terrorism (CFT)," the authority stated.

DFSA has "simplified view" of circumstances, FI says

EU banking directives, regulations and guidance sets out a minimum of harmonised standards for bank governance, the FI said further. This law very clearly imposes on the home member state a duty to supervise bank governance, including the governance of bank branches, as these are not separate legal entities with independent liability towards their creditors.

"The DFSA argues in the summary report that the FI is responsible for the AML supervision of the Estonian branch. This is a simplified view of the legal circumstances. FI has repeatedly explained that AMLD3, a piece of EU legislation harmonising anti-money laundering in the EU prior to June 2015, did not have any provisions on the division of responsibilities where cross-border banking is provided and freedom of establishment is exercised," the FI stated.

"Combating money laundering and terrorism financing by a bank is generally a matter of building effective controls, which is purely an issue of the bank's governance. It is the current opinion of the FI that it is rather artificial and unrealistic to make a sharp distinction between internal governance, which deals with money-laundering and and terrorism financing risks, and the rest of the bank internal governance," the FI wrote further.

"In practice, the internal governance of a bank is a holistic system. A majority of the responsible authorities in EU countries handle the AML risk control organisation of outgoing branches of a bank as a whole," it added.

Bickering about jurisdiction issues continues

Though the FI conceded that the differences between the ways member states arrange financial supervision may be an issue, it pointed to the EU's fourth anti-money-laundering directive, which entered into effect in 2015 and allocated responsibilities properly.

Where the DFSA stated in its report that "the host country supervisor, the FI, is responsible for the AML supervision of the Estonian branch," the FI would like it clarified which time period their Danish colleagues are referring to. In addition, it isn't clear "whether the DFSA is sufficiently qualified in Estonian law to make such a statement," the FI wrote.

Danish authority washes hands clean, insists blame to be put on FI

According to an internal report of the DFSA published on Thursday, the Danish authority's governing board is of the opinion that the DFSA has met its obligations as the competent authority responsible for Danske Bank and acted in accordance with the division of responsibilities. Anti-money laundering supervision in the case was with the FI, it said further.

"It is the opinion of the governing board that, in the entire period 2007-2018, the Danish FSA has met its obligations as the competent authority responsible for Danske Bank and has acted in accordance with the division of responsibilities in the AML area between the Danish FSA and the Estonian Supervisory Authority (EFSA)," David Lando, chairman of the governing board of the DFSA, said.

The governing board further stated that the FI has been and still is responsible for the anti-money laundering supervision of Danske's Estonian branch.

Danske Bank is under investigation by authorities in Denmark, Estonia, Britain and the United States over suspicious payments totalling €200 billion that were made through its Estonian branch between 2007 and 2015. The chief prosecutor's office of Estonia in December 2018 declared 10 former employees of the Estonian branch of Danske suspects in relation to the investigation into alleged money laundering at Danske.

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Editor: Dario Cavegn

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