New York State's banking regulator fined the New York branch of a Finnish bank $35 million for its involvement in
The bank in question, Helsinki-based Nordea Bank, was named in the so-called
Nordea, through its operations banks in Eastern Europe, executed illicit transactions from Russia, Azerbaijan and elsewhere into the U.S. and Western Europe, according to a lengthy consent order issued Tuesday by the New York State Department of Financial Services, or DFS. The bank also helped hundreds of customers create bogus companies for the purposes of opening offshore accounts.
The state regulatory agency accused Nordea Bank of failing to maintain effective money laundering controls, having poor oversight of its correspondent banks and inadequate transaction monitoring. DFS noted that the bank has taken numerous steps to mitigate these issues, but said work remains to be done.
"International financial entities such as Nordea must safeguard against criminal activity in the global financial system, and for years Nordea failed in these respects," said DFS Superintendent Adrienne Harris in a written statement. "It is critical that such institutions maintain robust compliance programs and conduct proper due diligence of their customers and banking partners."
The New York DFS acted alone in the consent order. A representative from the agency declined to comment on the record about why federal regulators were not involved in the action.
In a statement issued Tuesday, Nordea said it accepts the terms of the resolution and has sought to comply with the DFS investigation every step of the way. It also noted that it is "a different bank today, having invested €1.5 billion, or $1.67 billion, into risk and compliance since 2015.
"We do everything we can to prevent financial crime and the bank has taken significant measures to improve financial crime processes and procedures since the period covered by DFS's investigation," said Nordea Group's Chief Compliance Officer Jamie Graham in a written statement. "We are pleased that these remediation efforts and our extensive cooperation were also recognised by DFS."
Nordea's Vesterport, Denmark, branch, which was opened in 1989, would go on to become a hotbed for money laundering out of Russia and Eastern Europe. Of the branch's roughly 1,500 corporate customers, 72 were named in the Panama Papers, according to DFS. Meanwhile 29 were identified as being part of a money laundering operation called the Russian Laundry, nine were involved in a similar network known as the Azerbaijan Laundry and 11 were cited as being part of a $175 million illicit finance scheme flagged by the asset management firm Hermitage Capital Management in 2018.
Nordea's branch expansion into Estonia, Latvia and Lithuania throughout the 1990s also proved problematic. As early as 2010, Nordea's internal risk management functions began flagging money laundering concerns within the so-called Baltic branches, according to the DFS order, due in part to the "high corruption index" of the emerging free market economies, lackluster oversight standards and the banks' own struggles to identify "politically exposed persons."
In 2016, Nordea entered into an agreement with the Norwegian bank Den Norske Bank to combine their Baltic operations into an entity called Luminor Group AB. While the new group operated largely independently, its customers maintained access to many of Nordea's online platforms, including its U.S. dollar clearing service, according to DFS.
Nordea also drew scrutiny from its various regulators for its deficient know-your-customer practices involving its correspondent banks in Europe. In particular, DFS flagged its relationship with Denmark-based Danske Bank and the Bank of Cyprus as being poorly managed.
Nordea has had a presence in the U.S. since the late 1970s, according to the bank's website, though controlling interest of Nordea Bank New York transferred from Nordea Bank Sweden to Nordea Bank Finland in 2018, according to an approval document from the Federal Reserve Board of Governors.
