Analysis
20 September 2024

Look back at the CJIP concluded between Danske Bank and the French National financial prosecutor’s office (PNF)

Danske Bank was charged with tax fraud laundering which occurred between 2007 and 2014 due to the lack of effectiveness of its compliance control system. Its Estonian branch had a portfolio of international clients who frequently used shell companies to circumvent tax regulations. The Danish bank was investigated for money laundering in connection with a French company, the manager of which was convicted in a plea of guilty procedure in January 2024.

 

On 18 September 2024, the judicial public interest agreement (“CJIP”) entered into between the French Financial Public Prosecutor and Danske Bank A/S was validated by the President of the Paris Judicial Court[1]. Danske Bank A/S was subject to an investigation into organized tax fraud, in which the managing director of an import-export company was convicted of tax fraud by the Paris Criminal Court on 9 January 2024[2].

 

In February 2014, the Paris public prosecutor’s office received a complaint from Hermitage Capital investment fund on the grounds of fence of fraud and money laundering[3].

 

In June 2014, TRACFIN reported[4] to the Paris public prosecutor’s office suspicious activity on the bank accounts of the French import-export company Decobat. TRACFIN has a variety of investigative tools enabling it to gather evidence likely to identify the laundering of the proceeds of an offence punishable by a custodial sentence of more than one year or the financing of terrorism within the meaning of Article L.561-30-1 of the Monetary and Financial Code[5].

 

On 8 July 2014, a preliminary investigation was opened into, in particular, this company’s import activities in Russia[6].

 

A judicial investigation was subsequently opened on 9 April 2015 into organized tax fraud, money laundering and fence of fraud for acts committed in France and indivisibly abroad since 2008[7].

The investigation revealed that the Estonian branch of the Danish bank, the Sampo Bank, held a portfolio of thousands of customers residing outside Estonia (the “PNR”)[8], which it knew to be high-risk due to the customers’ countries of residence, their frequent use of shell companies capable of concealing the identity of their beneficial owners, the sender or the recipient of transactions and carried out suspicious transactions[9]. It therefore appeared that the branch had inadequate PNR compliance arrangements[10], which allowed customers to open accounts and record transactions without any checks or due diligence[11].

The investigation then revealed that Decobat’s manager had opened two accounts in the Sampo Bank in the name of two shell companies, which were used as transit accounts to circumvent tax and customs rules[12]. Decobat exported its goods to Russia by selling them to a company incorporated under Russian law, but using brokers to make customs declarations on import into the Baltic States, which were reduced, thereby lowering the assessment of customs duties and VAT. The Russian company then transferred its profits to Luxembourg via accounts opened in the British Virgin Islands and in Luxembourg via accounts opened at Sampo Bank[13].

Danske Bank’s audits up to 2014, as well as other internal control procedures, systematically concluded that customer control was satisfactory, revealing a passive and complacent attitude by the company, despite warnings from the Danish Financial Supervisory Authority (“FSA”)[14].

The inefficiency of these mechanisms enabled the head of Decobat, a French tax resident, to transfer more than €3 million from her two other companies to accounts in Luxembourg, in the name of offshore companies of which she was the beneficial owner[15].

 

Danske Bank A/S was then indicted for tax fraud laundering, committed between 2007 and 2014, aggravated by the fact that it was perpetrated by an organized gang, using several intermediaries whose sole purpose was to conceal the destination of the misappropriated funds and to pass them on to beneficiaries abroad[16].

 

These practices led to the conviction of the Danish bank in 2022, first by the Danish authorities for failure to comply with obligations to combat money laundering and the financing of terrorist activities, and then by the US authorities for conspiracy to commit bank fraud[17].

In France, the Danish bank admitted to the alleged offences, which are punishable under Articles 324-1, 324-2, 324-3, 324-4, 324-7, 324-8 and 324-9 of the Criminal Code[18], enabling it to benefit from the CJIP, an alternative to prosecution whose advantages include limiting the public interest fine[19].

Under the CJIP negotiated with the National Financial Prosecutor’s Office (“PNF”), it agreed to pay €6,028,799 as a public interest fine[20], after analyzing the major factors, such as the repetitive nature of the acts or the inadequacy of the compliance program[21], and the minor factors, such as the corrective measures put in place within Danske Bank or its cooperation in the investigation[22].

It also agreed to pay €300,000 in compensation to the French State, including €10,000 for material damage and €290 000 for psychological damage[23]. However, the Cour de Cassation has held on several occasions that the offence of tax fraud laundering does not cause the State any non-material damage likely to be compensated, since the damage “resulting from the acts of tax fraud laundering, characterized by the discredit brought on anti-laundering policies” is not distinct from the damage caused to the general interest compensated by the action of the public prosecutor[24]. Unless the existence of a non-material damage other than that linked to the discredit can be demonstrated, this CJIP has enabled the State to benefit from compensation for a damage whose existence would potentially not have been recognized in the context of a trial before a criminal court.

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