World’s Largest Wealth Fund Reveals Talks With Danske on Laundering Case

(Bloomberg) --

Danske Bank A/S was among 14 lenders singled out for talks by the world's biggest wealth fund last year to find out whether it's doing enough to prevent another money laundering scandal.

Carine Smith Ihenacho, chief corporate governance officer at Norway's $1.1 trillion investing behemoth, said the fund is targeting “banks we believe are especially exposed to the risk of money laundering.” That's “typically banks that have a big share of private-wealth management,” she said in an interview in Oslo on Tuesday.

The fund wants the companies it invests in to provide a lot more information on how they're living up to its sustainability standards on everything from governance to the environment.

On Tuesday, the investor published a report listing some of the biggest companies it sat down with last year to drive home its point, including Toyota Motor Corp., Volkswagen AG, Microsoft Corp. and Zalando SE.

In the report, the fund said it spoke with Citigroup Inc. about its anti-money laundering systems, but didn't identify any of the 13 other banks it said were contacted. Ihenacho told Bloomberg that besides Danske, Swedbank AB was among lenders asked to provide more information.

Danske is being investigated after admitting it failed to properly screen about $220 billion in non-resident flows in Estonia through 2015. The bank has since sold the Baltic operations at the center of the scandal, ratcheted up its compliance procedures and fired a number of the executives associated with the case.

Read More: Danske's Ex-CEO Targeted in $387 Million Investor Lawsuit

Swedbank, Sweden's largest mortgage lender, is also being investigated amid allegations it may have handled over $150 billion in potential suspicious funds via its Baltic operations.

Ihenacho said the oil fund is keen to figure out how the banks are using technology to protect themselves from future laundering risks. She also pointed to “culture” as an important element in fighting financial crime.

“The point of dialog is to understand how exposed they are to risk, and what measures they are taking to prevent things from happening on money laundering,” she said.

The laundering scandals that have engulfed Danske and Swedbank wiped out billions of dollars in shareholder value. Danske has lost more than half its value since the beginning of 2018, while Swedbank is down roughly 25% over the same period.

“It's been a big problem lately in the finance industry, and money laundering leads to great financial reputational risk,” she said. “And that's why we believe preemptive measures are important.”

--With assistance from Frances Schwartzkopff.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

©2020 Bloomberg L.P.