Something is Rotten in the International Branch

I wanted to share a short update on the now twelve-years-old money laundering investigation at Nordea Bank.* This piece is more “promotional” than it is analytical—I feel that the story warrants closer attention than it has received in the Compliance community to date (certainly in my network) as compared, for example, to the highly analogous Danske Bank money laundering affair. Further developments will also be worth following closely.

Last month, the ongoing court case revealed some correspondence from former Nordea executives, which indicated that management had been aware of and concerned about the problematic practice in the “International Branch” in Copenhagen. It would seem, however, that they decided not to intervene at the time—mainly because of the perceived reputational risk of doing so.

What is the case about?

News of the issues in the International Branch broke back in 2013, when leading Danish daily Politiken published an investigative report, largely based on leaked documents received by the International Consortium of Investigative Journalists (ICIJ). According to the report, over 100 companies based in tax havens such as the British Virgin Islands had, through Russian third-party intermediaries, used Nordea to pay their bills. According to the report, Nordea had only screened the intermediaries during their know-your-customer (KYC) process, and not the clients behind them—nor did they interrogate the origin of the funds. With this “omission”, the bank reportedly failed to identify high-risk individuals who were behind the third-party intermediaries, such as Australian businessman Geoffrey Taylor, whose achievements as per his ICIJ “bio”—a highly recommended read!—arguably elevate him to the ranks of a Bond villain.

Following several rounds of investigation by the Danish authorities, the National Special Crime Unit (NSK) finally indicted Nordea Bank in July 2024. According to NSK, evidence showed that DKK 26 billion (EUR 3.5 billion) in laundered funds had flowed through the International Branch between 2012 and 2015.
No individuals were charged during the indictment.

An unprecedented trial

The court case is historical not only because of the materiality of the alleged wrongdoing, but also because, as DR’s Jakob Ussing points out, it is the first case that a Danish bank is brought to court over an alleged violation of anti-money laundering regulations.

It’s tempting to comment on the detrimental effects of such a case on the levels of trust in the banking system. And if you happen to be a banking customer who has ever been mistakenly flagged as high-risk and subjected to the travails of “enhanced due diligence” (for example, because like yours truly, you happen to have the same first and last name as a politician), stories of people “slipping through” the KYC filter will inevitably invoke some post-traumatic stress.

But the commentary I’d offer instead, without suggesting blame, is that with the investigation and trial taking as long as they inevitably have, it is unlikely that any of the responsible persons, or indeed stakeholders present during the reported incidents, would still be around and have something to lose. Nordea has surely closed the controls gap, redrawn business plans, and overhauled lines of management and accountability ten times over. And while it is difficult to conceive of a fine too high if the acts included in the indictment had indeed been committed, it will be interesting to follow the case further. One aspect I for one will be anticipating is to what extent a corporate criminal liability approach—a theme on which I’ve already offered but have yet omitted to deliver a separate post—may factor into the judgment.

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*All information in this post should be understood as “reportedly,” and I have cited my sources throughout. Nordea’s representatives, and, figuratively, the corporation itself, should naturally be considered innocent until proven otherwise.