Welcome to our press conference 19 September 2018 Participants Ole - - PowerPoint PPT Presentation

Welcome to our press conference

19 September 2018

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Participants

Ole Andersen, Chairman of the Board of Directors of Danske Bank Carol Sergeant, Vice Chairman of the Board of Directors of Danske Bank Ole Spiermann, Partner at the Bruun & Hjejle law firm Jørn P. Jensen, Member of the Board of Directors of Danske Bank and Chairman of the Audit Committee Thomas F. Borgen, CEO of Danske Bank

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Danske Bank has not lived up to its responsibility We take the combating

• f money laundering

and financial crime very seriously The case in no way reflects the bank we want to be

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The first warnings came back 2007 Inadequate AML procedures in Estonia The problems were much larger than originally assumed Lack of management in Estonia and at Group level

The investigations conclude that

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The investigations have had consequences

Research, training, projects and

• ther initiatives aimed at

combating financial crime 42 reports to the authorities 8 reports to the police

Reporting to authorities

Warnings Dismissals Loss of bonus payments

Staff-related consequences Donation

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Reflections of the Board of Directors

1 2 3 Great caution when making acquisitions outside core markets Focus on integration and effective implementation

• f controls and systems

Cultural integration is decisive for transparency and trust

Governance of the investigation

Carol Sergeant, Vice Chairman of Danske Bank’s Board of Directors

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• Text 1

The investigation Comprehensive and objective investigations led by the Bruun & Hjejle law firm

What exactly happened at the branch in Estonia Around 70 persons have worked full-time

• n the investigations

Wish for objective and complete investigations

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Two overall tracks of investigation

Investigation of the non-resident portfolio Investigation of accountability

• 15,000 customers
• 9.5 million payments
• Internal collusion
• Institutional and individual

accountability

• 12,000 documents
• 8 million e-mails

Non-Resident Portfolio at Danske Bank’s Estonian branch, 2007-2017

1 9 S E P T E MB E R 2 0 1 8

Flow of the customers of the Non-Resident Portfolio

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Development of the Non-Resident Portfolio

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500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 2007 2008 2009 2010 2011 2012 2013 2014 2015 CORPORATE ENTITIES PRIVATE PERSONS TOTAL

Inadequate AML procedures at the Estonian branch

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Obligations AML failings re Non-Resident Portfolio at the Estonian branch Due diligence

• Lacking knowledge of customers
• Lacking identification of (ultimate) beneficial owners and

“controlling interests”

• Customers included so-called intermediaries, which were

unregulated and represented unknown end-customers Monitoring

• Insufficient attention to customer activities
• Lacking identification of the source and origin of funds
• No screening of customers against lists of politically exposed

persons

• No screening of incoming payments against sanctions or

terror lists

• In general, no automatic screening of incoming payments

Reporting

• Lack of response to suspicious customers and transactions

Sources and participants – customers, transactions and potential internal collusion

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Sources

• Information on customers
• Approx. 10 mill. payments
• Other material

CIM TEAM

Sources and participants – course of events and accountability

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Sources

• More than 8 million emails

and attachments

• Review of more than 12,000

documents, including 4,000 emails

• 74 interviews with 49

persons

Deposits for non-resident customers in Baltic banks

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2 4 6 8 10 12 14 16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 DEPOSITS OF THE NON-RESIDENT PORTFOLIO IN THE ESTONIAN BRANCH TOTAL DEPOSITS OF NON-RESIDENTS IN ESTONIA TOTAL DEPOSITS OF NON-RESIDENTS IN THE BALTICS

EUR BILLION

The Non-Resident Portfolio – and other customers subject to investigation

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15,000 non-resident customers pursuant to broader definition 10,000 customers in the Non-Resident Portfolio

Geographical distribution of the Non-Resident Portfolio

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Applied model of analysis

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Geographical distribution of flow of the Non-Resident Portfolio

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Incoming funds Outgoing funds Customers in the Non-Resident Portfolio Estonia (23 %) Russia (23 %) Latvia (12 %) Cyprus (9 %) UK (4 %) Other (30 %) Estonia (15 %) Latvia (14 %) China (7 %) Switzerland (6%) Turkey (6 %) Others (52 %)

Historical SARs and inquiries from the Estonian FIU

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Suspicious non-resident customers

Approximately 6,200 customers deemed suspicious

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Key events from 2007 to 2014

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Inquiries from the DFSA to Group in 2012 and 2013 Meeting with the EFSA i 2013 Termination of correspondent banking relationship in 2013 Business review of the Non-Resident Portfolio in 2013 Whistleblower report at the end of 2013 Acquisition of Sampo Pank Critical inspection report by EFSA Letter from the Russian Central Bank No integration of IT- platform for Group and the Baltics in 2008 EFSA inspection report in 2009 Reassuring reporting from Group Internal Audit and Group Compliance & AML 2007 2008-2012 H1 2014 Group Internal Audit reports in January and February Working group established Customer review of the Non-Resident Portfolio 2012-2013

Reponses to whistleblower and GIA reports in 2014

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Reporting to FSAs Whistleblower allegations Customer review HR action Identified AML risk

• Responsibility for reporting is unclear
• Reporting to neither the Danish FSA nor the Estonian FSA takes place
• Responsibility for investigation into allegations is unclear
• Insufficient investigation of allegations takes place
• Customer review is organised and executed inadequately
• No action against branch management
• No effective response to the identified AML risk
• No ”look back”

Key events from 2014 to 2017

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New policy regarding the Non-Resident Portfolio Strategy discussions regarding the Baltics at both the Executive Board and the Board of Directors New, highly critical EFSA inspection report H2 2014 2015 2017 “Russian Laundromat” Promontory’s root-cause analysis “Azerbaijani Laundromat” Extended investigations Highly critical inspection report from the DFSA with reprimand 2016 Termination of correspondent banking relationships Final precept by EFSA with orders Termination of the Non- Resident Portfolio

Termination of the Non-Resident Portfolio

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Note: Historical graph reported by Danske Bank in 2017.

Standards of accountability

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Employment contracts and employment law The duties of members of Board as found in statutory law and internal procedures Fitness and propriety Civil liability (tort) Criminal liability

Involved persons and departments

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Baltic Banking/ International Banking Executive Board CEO Board of Directors / Audit Committee

Estonian branch

Danske Bank’s compliance and AML work

Jørn P. Jensen, Member of the Board of Directors of Danske Bank and Chairman of the Audit Committee

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We have taken a number of initiatives to address the problems in Estonia

The portfolio of non-resident customers was closed down by the end of 2015 New management across the Baltic countries Independence of local control functions has been strengthened The Baltic units have been transferred to the joint IT platform In future, we will serve only subsidiaries of Nordic and international customers

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Initiatives to improve general efforts across the Group

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Stronger compliance culture and more knowledge Investments in more employee resources, new IT systems and stronger competencies Stronger organisation and internal procedures

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In coming years, we will continue to improve our efforts to combat financial crime

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Ongoing implementation of orders from the Danish FSA

New Chief Compliance Officer to take up office Group assessment of management and governance at the branch in Estonia New initiatives and procedures to ensure prompt investigation and escalation of issues Implementation of Pillar II capital add-on Integration of compliance as a fundamental part of the culture Central unit at Group level to ensure transparency and completeness in our interaction with the Danish FSA

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Disclaimer

Important Notice This presentation reproduces statements from Bruun & Hjejle’s Report on the Non-Resident Portfolio at Danske Bank’s Estonian branch, dated 19 September 2018, to which we refer. In the event of any discrepancy or ambiguity, the report from Bruun & Hjejle takes precedence. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an

• ffer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including the United States, or an inducement to enter into

investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Danske Bank believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors many of which are beyond Danske Bank’s control. This presentation does not imply that Danske Bank has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.