Nordea Bank Abp has reached a settlement with the New York State Department of Financial Services (NYDFS) after the regulator determined that the bank had compliance failures and failed to conduct proper due diligence of its correspondent bank partners.
The bank entered into a consent order with NYDFS and agreed to pay $35m in penalties, the state agency said in its press release.
NYDFS investigated Nordea after the 2016 Panama Papers leak and the fine represents a final resolution into the probe by the NYDFS concerning the adequacy of Finland-based Nordea’s anti-money-laundering (AML) safeguards in the 2008 to 2019 period.
“International financial entities such as Nordea must safeguard against criminal activity in the global financial system, and for years Nordea failed in these respects.”
NYDFS Superintendent Adrienne Harris
According to the agency’s release, Nordea did not adequately compensate for the increased risk level given the region and its customer base, failed to properly implement compliance initiatives, formed relationships with high-risk banking partners, and had an inadequate transaction monitoring system.
“International financial entities such as Nordea must safeguard against criminal activity in the global financial system, and for years Nordea failed in these respects,” NYDFS Superintendent Adrienne Harris said in the release. She criticized Nordea’s inadequate due diligence over customers and high-risk banking partners, saying even the bank recognized its oversight faced a “critical” risk of failure.
The bank said the NYDFS action “concerned Nordea’s former processes, policies and controls to prevent money laundering and the former compliance framework, including those of the closed Vesterport International Branch in Denmark and Nordea’s former operations in the Baltics.”
The combination of deficient AML controls, an unsophisticated transaction monitoring apparatus, and a decentralized global compliance program created a set of circumstances that exposed Nordea’s financial channels to a high risk of criminal abuse, the New York regulator alleged. Nordea’s relationships with US banks imported those risks to the New York financial system, it said.
The Panama Papers
The 2016 Panama Papers leak exposed Nordea’s role in helping hundreds of its customers create tax-sheltered companies using offshore accounts, Superintendent Harris said in the release.
The Panama Papers contained the financial information and details of offshore accounts of many of the global elite, exposing how some very rich people (and the large offshore law firm and several banks that assisted them) were using legal loopholes to avoid paying taxes and, as it was found in some cases, to commit tax fraud, tax evasion, and avoid international sanctions.
More compliance resources
In 2019, inadequate AML compliance controls were compromising Nordic banks’ bottom lines. To rectify the situation and satisfy regulators investigating them, the region’s largest financial institutions – Swedbank AB, Nordea Bank ABP and Danske Bank A/S – spent significant sums on new compliance systems and the hiring of staff members in the face of allegations of moving dirty money.
“The banks in my view that will be successful in the future are the banks that tackle compliance issues head on,” said Chris Vogelzang, Danske’s CEO, according to the WSJ at the time. At the time, Nordea’s CEO said that the bank’s spending on compliance systems had recently stabilized, but that it was was looking into ways to improve compliance through automation.
In this recent press release, NYDFS said Nordea has invested €1.5 billion ($1.67 billion) in risk and compliance since 2015, employs 3,400 people dedicated to combating money laundering and other financial crimes, and implemented more sophisticated prevention and detection techniques.
Jamie Graham, Nordea’s chief compliance officer, said the bank was pleased to settle, and acknowledged that it had historically “underestimated the complexity of preventing financial crime and the resources needed for that purpose.”