March 15, 2018 / 3:15 PM / a year ago

Shareholders criticise Danske Bank over Estonian money-laundering controls

COPENHAGEN (Reuters) - Several Danske Bank (DANSKE.CO) shareholders voiced discontent on Thursday with the bank’s alleged flaws in preventing money laundering in the past at its Estonia branch.

Estonia’s Financial Supervisory Authority (FSA) said last month it would look into whether Denmark’s biggest bank knowingly withheld information from the FSA during a series of inspections it conducted at the Estonian branch in 2014.

If that turns out to be the case, it could be a serious blow to the bank’s reputation which it has spent years restoring following a much criticised advertising campaign in late 2012.

“Given the seriousness of the case, the board should have reacted faster and initiated an investigation earlier,” Claus Wiinblad, senior vice president at Denmark’s largest investor, pension fund ATP, said at Danske Bank’s annual general meeting on Thursday.

ATP says it owned 1.05 percent of Danske Bank at the end of 2017.

Danske Chairman Ole Andersen said it was “highly unsatisfactory that we may have failed to meet both our own and society’s expectations to our anti-money laundering measures in Estonia in the period from 2007 to 2015.”

Danske Bank has itself launched an investigation into the case which is being conducted by the external Danish law firm Bruun & Hjejle and overseen by the bank’s board.

The case represents a serious short-term risk, because there still are many uncertainties, but the compliance area does not represent a serious long-term risk as the bank has done a lot to live up to its responsibilities, including increasing its compliance staff to 900 people, Wiinblad said.

He stressed that it is critical for Danske Bank to be transparent about the findings from its investigation and that it draws any necessary consequences from it. “Nothing must be swept under the carpet,” he said.

The case is “painful” Leonhardt Pihl, chief executive of Danish Shareholders Association, a lobby group for private investors, said.

“The interest this case draws from the press and the politicians cannot help but affect the reputation of the bank,” Pihl said.

Denmark’s Financal Supervisory Authority is also looking at the bank. But its chairman Henrik Ramlau-Hansen has recused himself from the case as he was chief financial officer at Danske Bank from 2011 to 2016.

“It is difficult for an outsider to understand how Danske Bank in its investigation will question the former CFO, now the chairman of the FSA,” Pihl said.

Reporting by Teis Jensen; Editing by Jane Merriman and Adrian Croft

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