Bank Settles Fraud Charges Tied to AML Deficiencies

A Denmark-based bank settled DOJ and SEC charges for fraud and failure to disclose deficiencies in its AML compliance program related to its Estonian branch.

In its release, the DOJ said that the Denmark bank lied to U.S. banks about its deficient systems, monitoring capabilities and high-risk, offshore customer base. The DOJ stated that these misrepresentations were made in an effort to gain unlawful access to the U.S. financial system. The firm pleaded guilty to one count of conspiracy to commit bank fraud.As a part of the bank's guilty plea agreement with the DOJ, it agreed to a criminal forfeiture of $2.059 billion.

According to the SEC release, the firm acquired its Estonian branch in 2007 and knew, or should have known, of the significant deficiencies in the branch's AML procedures. The SEC stated that these deficiencies involved: (i) a substantial portion of the branch's customers, and their transactions, presenting a high risk of money laundering; (ii) AML systems that were inadequate and (iii) AML and Know-Your-Customer procedures not being followed. The SEC found that, while the firm was aware or should have been aware of these deficiencies, it's public reports stated that its AML policies and procedures were compliant. As a result, FINRA found that the bank violated Exchange Act Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") and Exchange Act Rule 10b-5 ("Employment of manipulative and deceptive devices."). In its settlement, the bank agreed to pay (i) $178.6 million in disgorgement, (ii) $55.8 million in prejudgment interest, and (iii) $178.6 million in civil penalties.