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Danske Bank to pay $413 million to settle SEC charges over money laundering at its Estonia branch

The Securities and Exchange Commission on Tuesday announced fraud charges against Danske Bank for misleading investors about its anti-money laundering compliance program at its Estonian branch and failing to disclose the risks created by its “significant deficiencies.” Danske has agreed to pay $413 million to settle the charges. The Danish lender should have known when it acquired the Estonian branch back in 2007 that a “substantial portion” of its customers were engaged in activities that were highly likely to involve money laundering, the SEC said in its complaint. It should further have known its own internal risk management procedures were inadequate to prevent it and that staff were not following anti-money laundering processes and complying with laws. That allowed them to transact billions of dollars in suspicious transactions in the U.S. and other countries in the period stretching from 2009 to 2016 that accounted for 99% of the branch’s profit. None of the customers were residents of Estonia. The complaint also alleges that Danske knew of the transactions, but made “materially misleading statements and omissions in its public reporting. Corporations that raise money from the public must disclose information that is material to investors, who then get to decide what risks they want to take. That’s the basic bargain of our securities laws and it extends to foreign issuers like Danske Bank, which sought to access our capital markets, even though its securities were not registered with the Commission,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. Danske’s U.S.-listed shares were slightly lower on Tuesday.

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