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Danske Bank defeats appeal in U.S. over money laundering scandal

Danske Bank defeats appeal in U.S. over money laundering scandal
Danske Bank defeats appeal in U.S. over money laundering scandal   -   Copyright  Thomson Reuters 2021
By Reuters

By Jonathan Stempel

NEWYORK -Danske Bank A/S and former top executives on Wednesday defeated an appeal in New York by shareholders claiming they were defrauded because the Danish bank allowed widespread money laundering at its former Estonian branch.

The lawsuit began after Danske said in September 2018 that an internal probe had uncovered about 200 billion euros ($235 billion) of suspicious transactions through its Estonian branch from 2007 to 2015.

But the 2nd U.S. Circuit Court of Appeals concluded that “money-laundering at a single branch in Estonia cannot alone establish that Danske Bank itself carried out a deceptive scheme to defraud investors.”

Circuit Judge Dennis Jacobs wrote for a three-judge panel that accusations that Danske improperly reported revenue from money laundering, downplayed supervision failures and mishandled whistleblower complaints did not support the fraud claims.

Four pension funds in New York and Massachusetts led the proposed class action, seeking damages for investors who lost money in Danske’s American depositary shares from Jan. 9, 2014, to April 29, 2019.

Their lawyers did not immediately respond to requests for comment.

Claims against former Danske Chief Executive Thomas Borgen, the estate of former Chairman Ole Andersen, and two former chief financial officers were also dismissed.

Wednesday’s decision upheld an August 2020 ruling by U.S. District Judge Valerie Caproni in Manhattan.

Authorities in several countries began investigating the suspicious payments made through Danske’s Estonian branch, and Estonia ordered Danske to exit the country.

The bank has also faced litigation in Denmark, including a lawsuit by the U.S. government and the Federal Retirement Thrift Investment Board in the Copenhagen city court.

Danske spokesman Stefan Singh Kailay said the bank was pleased with Wednesday’s decision, and will continue defending against civil shareholder claims in Denmark.

The case is Plumbers & Steamfitters Local 773 Pension Fund v. Danske Bank A/S et al, 2nd U.S. Circuit Court of Appeals, No. 20-3231.

(1 euro = US$1.175)