Danske Bank board member ousted over money laundering scandal
Chief says group ‘should have undertaken more thorough investigations’ earlier
Danske Bank’s growing money laundering scandal claimed its first management scalp as Denmark’s biggest lender ousted the head of its business and international units.
Danske is being investigated by Estonian and Danish regulators over potential money laundering in the Baltic country.
Lars Morch, the member of Danske’s management board responsible for business banking as well as Estonia, resigned on Thursday, although he will remain on the bank’s payroll until October 2019.
“Although the ongoing investigations into the issues related to the Estonian non-resident portfolio have not been completed, it is now clear that the bank should have undertaken more thorough investigations at an earlier point,” said Danske’s chairman, Ole Andersen.
Danske has faced a long series of allegations from Danish newspaper Berlingske that lax controls in its Estonian operations from about 2007 until 2015 led to money laundering from the likes of Azerbaijan, Moldova and Russia. Senior executives have come under pressure about what they knew and when, as well as why they did not act sooner to address the problems.
Mr Andersen admitted on Thursday that if Danske had investigated earlier it “would have led us to understand the full extent of the issues sooner and prompted swifter actions. We have discussed this situation with Lars Morch over the last few weeks”.
Danske has hired a law firm to conduct its own investigation, due out later this year. Berlingske reported in February that a whistleblower told senior management in 2013 of allegations that a relative of Russian president Vladimir Putin and Russia’s intelligence services were behind money laundering in the Estonian branch.
The probe could raise questions for Thomas Borgen, who has been Danske’s chief executive since 2013 and was in charge of international banking for four years before that. Danske said Mr Borgen would temporarily take over Mr Morch’s responsibilities.
The investigation of Danske is only the latest in a series of money laundering problems to hit both Nordic and Baltic banks in recent years. Nordea, the region’s largest lender, and Handelsbanken were both fined by Swedish regulators for lax controls in 2015.
ABLV, Latvia’s third-largest bank, is in the process of liquidating itself after being accused by the US of “institutionalised money laundering” while the European Central Bank last month pulled the plug on a small Estonian lender, Versobank.
Danske itself was fined DKr12.5m ($2m) in December by Danish authorities for violating anti-money laundering rules unrelated to the specific allegations in Estonia. Mr Borgen has called the lack of controls in Estonia “deeply regrettable and completely unacceptable”.
Shares in Danske are down about 10 per cent since the fresh investigation by Estonian regulators was confirmed at the end of February. “Given the seriousness of the case, the board should have reacted faster and initiated an investigation earlier,” a representative of Denmark’s largest pension fund ATP said at Danske’s annual meeting last month.