Amidst ongoing investigations of a vast money-laundering scandal, Denmark’s financial watchdog, the Financial Supervisory Authority (FSA), has filed a criminal complaint against Danske Bank (DANSKE.CO) over violations of market abuse regulations. The announcement this week saw the country’s biggest lender reported to state police for violating numerous regulations designed to protect investors from market manipulation.
According to the FSA in Copenhagen, Denmark’s biggest bank routinely entered into agreements to buy or sell financial instruments without any change in ownership of the securities. Danske misinformed the financial market by facilitating these “wash trades” between August 12, 2016, and February 22, 2019, in which the same person sells and buys securities. “Danske Bank has clearly had insufficient oversight of its trading in financial instruments,” the FSA said in explaining how such trades can prop up or devalue the price of securities without detection. The FSA also reported Danske for its failure to properly monitor and report transactions. Both violations, which constitute market abuse, could result in hefty fines.
Danske Bank conceded that its protective processes against market manipulation were inadequate. Chief Compliance Officer Philippe Vollot said the bank began to correct gaps in its monitoring systems and, “since 2019, made significant investments to strengthen the systems and controls in close dialogue with the FSA,” adding that the Bank had not seen any indication of “intentional wrongdoing or any harm to customers or market participants.” The FSA did not find that the bank intentionally facilitated trades with itself, “However, trading with oneself is illegal if the behavior exhibited is market manipulative, regardless of whether the investor has traded with himself intentionally or not.” The transactions reflected flaws in its trade surveillance systems and process.
In December, Danske was among four banks “reminded” to improve their surveillance of market transactions by the FSA. The agency said that the banks didn’t systematically monitor communications leading up to orders being placed by clients, unless there was a firm suspicion of market abuse. Danske’s scandals have cost multiple executives their jobs, including former CEO Thomas Borgen, who was fired for his role in the laundering scandal. Chairman Karsten Dybvad recognizes the severity of his bank’s infractions, “The workload related to it remains high because we have to settle all this, and when we have settled it, we can move on.”