Helsinki, Finland-based Nordea Bank has agreed to pay $35 million to settle an investigation by the New York Department of Financial Services into “significant” anti-money laundering and bank secrecy law violations related to the 2016 Panama Papers leak. Authorities announced on Tuesday..
Regulators cited billions of dollars of high-risk transactions, particularly linked to Nordea Bank’s closed Vesterport branch in Denmark and its operations in the Baltic states, between 2008 and 2019. The NYDFS said its investigation uncovered links between Nordea Bank and illicit funds funneled into its operations, primarily in Russia and Azerbaijan.
“International financial institutions like Nordea need to protect against criminal activity in the international financial system, but Nordea has failed in this regard for many years,” NYDFS Superintendent Adrian Harris said in a statement on Tuesday.
By itself Nordea in a statement on Tuesday The bank said it has invested €1.5 billion in risk and compliance since 2015 and employs more than 3,400 staff dedicated to tackling financial crime.
“Until now, we have underestimated the complexity of preventing financial crime and the resources it would require,” Jamie Graham, Nordea’s chief compliance officer, said on Tuesday. “We have invested heavily in our AML program in recent years and fighting financial crime is a key priority for Nordea.”
The bank said it was not aware of any investigation by U.S. authorities into its operations and added that it would reflect the fine in its third-quarter results. It said the fine would not have a “material impact” on Nordea’s financial position.
“Insufficient 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 the risk of criminal abuse,” the NYDFS said in a statement on Tuesday. “Nordea’s relationships with U.S. banks introduced these risks into the New York financial system.”
the Consent OrderThe NYDFS said Nordea had “acknowledged its shortcomings.”
Nordea opened a branch in Vesterport in 1989 to serve as a base of operations with Russia and Eastern Europe. The NYDFS noted that 72 of the Vesterport branch’s roughly 1,500 corporate clients were named in the Panama Papers, a collection of 11.5 million documents published by the now-defunct Panamanian law firm Mossack Fonseca that revealed the bank had helped politicians, the wealthy and criminals set up shell companies to park funds in offshore accounts and avoid paying taxes.
The NYDFS said about 30 Besterport clients were found to be involved in a Russia-linked money laundering scheme, including 11 linked to a $175 million financial scheme identified by asset management firm Hermitage Capital Management in 2018. Nine were linked to money laundering activities in Azerbaijan, the NYDFS said.
Nordea Bank expanded its presence in the three post-Soviet countries of Estonia, Latvia and Lithuania in the 1990s. The Finnish bank’s risk management team has been raising money laundering concerns in the Baltic states since the early 2010s, citing “high corruption indicators” in the newly liberalized economies, weak oversight standards and insufficient identification of “politically exposed persons,” according to the NYDFS.
Nordea is not the only Nordic bank to face AML-related fines in the U.S. Danske Bank was hit with a fine in 2022. $2 billion confiscated To resolve a Department of Justice investigation into alleged fraud.
The NYDFS concluded that Nordea Bank’s AML practices at its Baltic branches did not adequately address the increased risks, saying the bank “consistently failed to properly implement compliance measures, [it] due to heightened financial crime risks,” the regulator said.
Additionally, the bank developed relationships with high-risk partners and Nordea’s transaction monitoring systems were inadequate, the NYDFS said, noting that the bank itself considered its overall AML risks to be “significant.”
“It is critical that financial institutions maintain robust compliance programs and conduct appropriate due diligence on their customers and banking partners,” Harris said Tuesday.
Graham, Nordea’s compliance chief, noted that the bank has been in “close ongoing dialogue and collaboration” with the NYDFS since 2019 and said it was “pleased” the regulator had recognised those efforts..
