DBRS: Deficiencies in Controls Damage Danske’s Reputation
Recently published investigations into the Estonian branch of Danske Bank A/S (Danske or the Bank) have revealed serious shortcomings in the Bank’s control systems and governance with regards to potential money laundering.On September 19, 2018, Danske Bank announced the findings of an independent law firm’s investigations into the Bank’s branch in Estonia. The report highlights a number of factors that could have contributed to the large amount of suspicious transactions in the Bank’s non-resident portfolio and notes that Danske missed several warning signs to scrutinise existing procedures and gain better insight in the non-resident portfolio.
Investigations into the Estonian case are still ongoing with the final outcome remaining uncertain. DBRS would expect Danske to receive a large fine given the prolonged period of time and the very high estimated amount of money transferred through the non-resident portfolio in Estonia. DBRS notes that Danske has been generating strong profits over the past 3 years, however, a substantial fine, especially if accompanied by weakening in investor confidence could lead to negative rating pressure.
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