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The sheer scale of Danske Bank A / S's inability to apply even half-decent anti-money-laundering defenses in its Estonian branch makes believe the belief.
Chief Executive Thomas Borgen resigned on Wednesday when the bank released the findings of his internal investigation into the scandal. The President suggested that his own departure was only a matter of time. The report exempts counsel from legal guilt on the ground that he had incomplete information and was assured that action was being taken. When ignorance is the best defense, you need to ask what motivates a CEO to ask probing questions or to encourage a concerned stakeholder to knock on the door.
The internal investigation revealed that an incredible amount of 200 billion euros ($ 234 billion) had been channeled through Danske's Estonian subsidiary between 2007 and 2015. A large part of these transactions was suspect, he noted, without being more specific. The unit, which Danske inherited through an acquisition, operated on a separate computer platform.
The warning signs were there, though. As early as 2007, the central bank of Russia, via the Danish regulator and the Estonian financial supervisor, worried. The profits of the unit were exceptionally high. Despite everything, Danske did not dispute the information of the branch. A whistleblower launched the alert at the end of 2013. Yet management has agreed to be reassured that an internal investigation had handled their claims. Additional regulatory intervention was required to shut the unit down.
The suggestion was that this was not a problem with the company structure, which meant that it was more about the competence of its staff to identify suspicious activities in the branch. There was apparently no warning asking for the CEO's intervention before 2014. Yet, the organization was clearly flawed. There has been a colossal failure of management in establishing a culture and procedures to ensure that information and concerns go back to the board.
Danske will face financial penalties. He donated $ 1.5 billion ($ 235 million) to a Financial Crime Foundation, the equivalent of gross revenue from dubious unit transactions during the course of the year. the period. In addition, fines are likely to follow. The joker remains the possibility of an American probe.
Naturally, Danske claims to have made changes. These are far from complete. He has to hire a third party as CEO. Ole Andersen's proposal to withdraw from his position as president once stabilized leadership is welcome. The first job of the new management team will be to make sure that in the future they will not have any more excuses about who knew what and when?
To contact the author of this story: Chris Hughes at [email protected]
To contact the editor responsible for this story: James Boxell at [email protected]
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Hughes is a columnist at Bloomberg Opinion. Previously, he worked for Reuters Breakingviews, as well as for the Financial Times and the Independent newspaper.
© 2018 Bloomberg L.P.
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