Nordea, the Scandinavian financial giant, has made a €95 million (US$106.45 million) provision in its first-quarter report for the possibility of a money-laundering fine at the hands of Danish regulators. Its CEO told a recent press conference that "we are likely to receive fines."

In its report, entitled First Quarter Results 2019, CEO Casper von Koskull, 58, comments from the group's head office in the Finnish capital of Helsinki: "This quarter, there has been an intense debate about various anti-money-laundering issues. It is a very complex and broad issue in society and we take our responsibility very seriously. We have previously stated that we expect to be fined in Denmark for our past weak AML processes andprocedures, and we are consequently making a provision of €95 million for AML-related matters. Having invested more than €700 million in strengthening our risk and compliance activities in 2016–2018, we are confident that our compliance platform is of sounder quality, making us a safe and trusted partner."

The CEO is also a supporter of the European Union's recent call for further centralisation in money-laundering control: "Harmonisation of anti-money-laundering rules and supervisory practices are necessary, and we would support the creation of an EU-level agency, with the purpose of combating money laundering and financial crime."

Further on in the report, the bank is a little more specific about the money-laundering furore that has engulfed it, along with Swedbank, Danske Bank and other banks in Scandinavia and the Baltic States, with US authorities spearheading the enquiries and north European regulators blushingly struggling to catch up.

Investigations that could lead to criticism or sanctions

"The Nordea Group is also responding to inquiries from US governmental authorities regarding historical compliance with certain US financial sanctions during 2008–2014. The outcome of some investigations is pending, and it cannot be excluded that these investigations could lead to criticism or sanctions. In June 2015 the Danish Financial Supervisory Authority investigated how Nordea Bank Danmark A/S had followed the regulations regarding anti-money laundering (AML). The outcome has resulted in criticism and the matter was, in accordance with Danish administrative practice, handed over to the police for further handling and possible sanctions. As previously stated, Nordea expects to be fined in Denmark for our weak AML processes and procedures in the past and is consequently making a provision for ongoing AML-related matters."

The Danish FSA case of 2015 is still pending. Sweden fined Nordea in 2013 and 2015 for insufficient AML processes. Nordea says that it now has more than 1,500 employees working specifically to prevent financial crime, in addition to its 12,000 front-line staff whom they train regularly on the subject.

A brave public face

At the recent press conference that Nordea held to disclose the report's contents, von Koskull explained the imbroglio in which his bank had found itself.

"Hermitage Capital filed money-laundering allegations with all Nordic regulators in October. In December the Swedish authorities stated that they will not start a formal investigation in this and, er, we are yet to hear actually from the other Nordic authorities, I guess. Finland has said that they may actually come out with something in the coming weeks."

Starting off with a mouth-shrug and a grimace and talking in a nervous, haltering voice, von Koskull nevertheless put in a very slick performance as he tried to smooth matters over. He cast one regulator's turbulent interaction with his bank in a remarkably positive light, stating that "when the Swedish FSA concluded a review of Nordea AML prevention in the latter part of 2018, that resulted in satisfactory feedback to the bank."

After one of many sharp intakes of breath, von Koskull claimed that Nordea had improved its AML efforts greatly since his arrival: "This is an issue we take very seriously. We are a very different bank today than we were 3 or 4 years ago." He said that it had been his "number-one priority" ever since he became the bank's CEO on 1 November 2015, taking over from Christian Clausen.

Potential trouble from other quarters

Nordea's compliance has been in the news for another reason lately. It has just concluded a billion-dollar credit agreement with the parent company of a bunkering (fuel shipping) firm called Dan-Bunkering. Based in the Danish town of Middelfart, the firm is alleged to have supported the Syrian war by sending jet fuel there for the use of Russian fighter jets, in contravention of sanctions levied by the European Union, to which Denmark belongs, in 2014.

The Danish tax authorities are also trying to work out whether there is a basis for raising a claim for damages against Nordea relating to Nordea's assistance to a foreign bank in connection with the said bank's reclaim of dividend tax on behalf of one of its customers. At this point in time, according to the report, it is not possible to assess the risk related to the case.

Solidarity through meetings

Elsewhere, in its latest Responsible Investments Report, the bank has reportedly stated: "Money laundering is fast emerging as the main regulatory challenge facing financial institutions. Prompted by the developments at Danske Bank, we met with several banks to gain a deeper understanding of the challenges they face in their anti-money laundering (AML) and know your customer (KYC) processes." This is reportedly a reference to Nordea's compliance officers meeting their counterparts at BNP, Danske Bank, ING and Swedbank. Among other things, the bank expects to use these conversations to improve its own internal ESG (environmental, social and governance) risk scoring.

The era of large scandals is over!

The chairman of Sampo Oyj, the huge holding company that is Nordea's largest investor, told reporters in Stockholm in the last few days that he thought that “the era of large scandals is over.” Björn Wahlroos, 66, nevertheless resigned last month as the chairman of the board at Nordea.

Nordea's net profit decreased by 11% from the previous quarter. However, investments in Private Banking Norway and Sweden are bearing fruit and Nordea had a positive net inflow of €700 million in the quarter with total new net inflow in asset and wealth management of more than €1 billion. It has also started up eleven new ESG funds.