By Sarah N. Lynch
WASHINGTON (Reuters) – Danske Bank, the largest bank in Denmark, pleaded guilty to bank fraud on Tuesday and agreed to forfeit $2 billion as part of an agreement with the United States following an investigation into billions of dollars in illicit payments that flowed from high-risk clients in Russia and elsewhere, the Justice Department announced on Tuesday.
The accord with the Justice Department marks the first time the United States has taken action against the bank, following a lengthy investigation into its conduct across multiple countries including Great Britain, Denmark and Estonia.
In addition to the criminal plea, the bank also separately settled on Tuesday a parallel civil investigation with the U.S. Securities and Exchange Commission.
The Justice Department said it intends to credit the bank $850 million in payments that will be used to resolve other separate criminal and civil claims with the SEC and with Danish authorities.
In court filings, the bank admitted it defrauded U.S. banks between 2008 and 2016 by allowing high-risk non-resident customers from other countries, including Russia, through its Estonia branch.
Prosecutors said the bank’s Estonia office attracted clients by promising them they could transfer large amounts of money with little oversight.
The Justice Department said the bank’s employees also worked to hide the nature of the illicit transactions by using shell companies to obscure ownership of the funds.
In doing so, Russian and other high-risk clients were able to gain access to U.S. banks, which collectively processed $160 billion on their behalf.
The Justice Department said Danske Bank was aware of illicit transactions by at least February 2014, after they came to light through internal audits as well as from a whistleblower and through information from regulators.
The bank was also aware that its Estonian arm’s anti-money laundering program was not up to its standards, prosecutors said.
The money-laundering scandal at Danske Bank has plagued the company for about five years, with the bank saying in October it was setting aside $1.9 billion to resolve probes by the Justice Department, SEC and the Danish Special Crime Unit.
Danske Bank ‘s former CEO Thomas Borgen was also sued by investors over the scandal, but a Danish court cleared him of liability in November.
On Monday, a group of investors who lost the lawsuit appealed that decision.
(Reporting by Sarah N. Lynch; editing by Tim Ahmann)
