A possible anti-money-laundering fine of 400 million kroner, or about $45 million, is manageable for Norway's DNB ASA and has not prompted concern among analysts. A penalty could be more significant should the bank be found to have been involved in actual money laundering.
Norway's largest lender announced Dec. 7 that there is "a possibility" that it will receive an administrative fine of that size from the country's financial regulator, based on an ordinary inspection carried out in February 2020.
In a preliminary report, Finanstilsynet criticized DNB for "inadequate compliance with the Norwegian Anti-Money Laundering Act," but not any complicity in money-laundering, according to the bank. DNB could not go into further detail on the content of the report because the case was still being processed, it said.
The financial impact of a 400 million kroner fine would be "marginal" and "more than manageable" for DNB, said Vitaline Yeterian, senior vice-president for global financial institutions at DBRS Morningstar, in an emailed comment. In the third quarter alone, DNB reported a profit attributable to shareholders of 5.29 billion kroner.
The Norwegian lender could make a provision for the fine in the fourth quarter of this year, Arctic Securities analyst Joakim Svingen said in an interview, adding that it would be "a scratch, but not a severe one in my view." He does not expect it to have any impact on DNB's capital ratios nor its dividend ambitions.
As for future compliance costs, DNB told S&P Global Market Intelligence it has already "made major investments in IT systems, people and expertise related to anti-money laundering in recent years" and believes that "its current staffing level is sufficient to remedy the noted weaknesses." As such, DNB does not expect Finanstilsynet's notice to result in any new and significant costs for the bank.
It said Finanstilsynet was "right in saying that we have areas for improvement," and that it takes the notice "very seriously."
The bank's share price dropped just 0.4% at market close Dec. 7.
Systematic misconduct
Svingen said he was not surprised by the news of a possible fine, given that Norway's financial regulator has increased its focus on anti-money-laundering lately, resulting in penalties for other Norwegian banks such as Komplett Bank ASA, Santander Consumer Bank AS, Hønefoss Sparebank and Åfjord Sparebank since 2019.
The fine announcement underlines that DNB's anti-money-laundering procedures are "not functioning 100%," but is unlikely to be the start of a scandal similar to those seen at Nordic peers such as Danske Bank A/S and Swedbank AB (publ), according to Svingen.
Denmark's largest lender Danske was found to be involved in one of history's biggest money-laundering scandals, with up to €200 billion of non-resident transactions flowing through its Estonian branch from 2007 to 2015, most of which were suspicious. The bank now risks hefty financial penalties from U.S., Danish and Estonian authorities.
Swedbank and Skandinaviska Enskilda Banken AB, meanwhile, both received fines from the Swedish regulator this year, after admitting to processing billions of euros worth of low-transparency transactions through their Baltic branches. Nordea Bank Abp, too, has faced claims of money laundering in relation to the same region.
"What is very important is that it's not suspicion of money laundering, but about operations and practices at DNB that are not sufficient," Svingen said. "If it was a serious matter, the regulator could have implied a much bigger fine."
A 400 million kroner fine would constitute only about 7% of the maximum amount Finanstilsynet is at liberty to impose, according to DNB.
Icelandic scandal
Unlike several of its Nordic peers, DNB has largely steered clear of Baltic-related money-laundering accusations so far. Last year, however, it faced allegations that it facilitated illicit payments worth millions of dollars for Icelandic fisheries group Samherji hf. in what was claimed to be linked to bribes for fishing quotas in Namibia.
Norwegian police are investigating these claims, but Svingen said he is "not concerned that that's going to be a severe case for DNB either."
Despite the Samherji scandal, so far there is no indication of "systematic misbehavior" at DNB, as was seen with Danske, Swedbank and SEB, said ABG Sundal Collier analyst Jan Erik Gjerland in an interview.
But he said there is a risk that DNB could be found to have been involved in money laundering through, for example, its Baltic entity Luminor Group AB before selling most of its stake to The Blackstone Group Inc. in 2019. Such a finding, which "one should never rule out," would prompt a more significant penalty, Gjerland said.
DNB has previously said the decision to sell its Baltic operations is not linked to money-laundering concerns, and that its strategy in the Baltics has been to serve the local personal customers and SME segments rather than nonresident customers outside the European Economic Area.
As of Dec. 7, US$1 was equivalent to 8.73 Norwegian kroner.