Anti-money Laundering & Fraud in Denmark

06/02/2019

General climate and recent developments

State of legal development

In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?

The Fourth EU Anti-money Laundering (AML) Directive (2015/849) was implemented into Danish legislation on 26 June 2017. The directive is an implementation of the 2012 Financial Action Task Force recommendations. Danish legislation is up to date and compliant with international obligations. However, in light of recent money laundering scandals in Denmark, the political climate is currently in favour of stricter legislation.

The laws pertaining to fraud and other financial crime are in line with international expectations.

Recent developments

Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?

Recent years have been marked by a number of substantial money laundering matters, most notably the scandal surrounding Danske Bank and its Estonian activities. This matter has led to further supervisory action, parliamentary hearings and criminal investigations into the bank and its activities. As a result of Danske Bank and other similar matters, political scrutiny of anti-money laundering and terrorist financing has intensified.

Parliament reached two political agreements in this area in June 2017 and September 2018. The agreements include a political commitment to pass new legislation increasing penalties and strengthening the Financial Supervisory Authority's (FSA) powers. At the end of 2018 new legislation was passed amending the Criminal Code, and money laundering is now punished directly instead of being included in the provisions on penalties for sharing the proceeds obtained from criminal acts. Financial sector legislation has been amended, making it possible for the FSA to withdraw a licence due to gross violation of AML legislation. The 'fit and proper' requirements for the management of financial undertakings have been altered to ensure that breaches of AML legislation are expressly a part of the assessment.

Finally, the designated AML person (a requirement for some industries covered by the AML Act) may be asked to step down by the FSA. Hence, although the person in question may be considered fit and proper when taking the position, they may subsequently be found not to be so by an administrative decision.

Political agreements consider increased requirements for advisers (eg, legal advisers and accountants in respect of anti-money laundering and terrorist financing). Further, there is a desire to ensure a sound and healthy ethical working environment by requiring the financial institutions to prepare and adopt codes of ethics. The agreements contain further elements that have not yet turned into legislation and more initiatives are likely in the near future.

In respect of fraud, Denmark experienced a number of significant developments in 2018. In May 2018 a former executive of the now defunct oil trading company OW Bunker was sentenced to 18 months' imprisonment for fraud in connection with the sudden collapse of the company. The conviction has since been appealed. Other legal proceedings relating to OW Bunker and its demise are ongoing. In June 2018 the IT company Atea and four of its senior employees were convicted of gross corruption. In this case, three employees at the public authority Region Zealand (the recipients of the corrupt benefits) were also convicted. Also in June 2018 three former partners of the now dissolved law firm Schlüter were convicted of defrauding producers of income from film and TV rights of at least Dkr100 million. Two of the convictions have since been appealed. The most significant development of 2018 related to a civil servant who is currently under investigation for having defrauded the authorities since 2002 for at least Dkr110 million throughout her employment at the Ministry of Social Services and related agencies.

Legal and enforcement framework

Domestic legislation

What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?

The Act on Measures to Prevent Money Laundering and Financing of Terrorism (Act 651 of 8 June 2017) (the 'Anti-money Laundering (AML) Act') is the primary legislation. Orders issued under this act include:

  • the Order on Reporting and Publication of Information on Domestic Politically Exposed Persons (PEPs) (Order 1704, 20 December 2017);
  • the Order on reporting to the Public Prosecutor for Serious Economic and International Crime (Order 1403, 1 December 2017);
  • the Order on Reduced Requirements for the Know-Your-Customer Process in Certain Circumstances (Order 1359, 30 November 2017);
  • the Order on Undertakings and Persons Exempt from the AML Act (Order 1358, 30 November 2017); and
  • the Order on the Duty of Financial Undertakings to Publish the Danish Financial Service Authority's (FSA) Assessment of the Undertaking (Order 1567, 23 December 2014).

The order on domestic PEPs is a solution specific to Denmark. All domestic PEPs are required to send in their personal information (eg, name and position) to the Financial Services Authority (FSA). The FSA keeps a list published on its website where all names are disclosed. The list covers only the PEPs themselves and not their relatives and close business partners.

In respect of fraud, Denmark's primary legislation is the Criminal Code (Consolidated Act 1156, 20 September 2018). Section 279 is the main provision of the code, which falls under offences against property in Part 28. The provision criminalises the act of creating, confirming or exploiting a mistake to obtain an unlawful gain for oneself or others, inducing another person to perform or fail to perform an act and thereby inflicting a property loss on such other person or someone to whom the performance or failure becomes essential. As a lex specialis provision, Section 279a criminalises data fraud.

To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?

The AML Act covers both undertakings and individuals carrying out business covered by Appendix 1. The act covers business carried out in Denmark. However, the supervisory authorities are obliged to work closely with foreign supervisory authorities when the undertaking located in Denmark is part of a group domiciled abroad. If the parent company is Danish, the Danish authorities are responsible for supervising the group policies on anti-money laundering and counter-terrorism financing.

In relation to fraud, Section 279 of the Criminal Code covers both undertakings and individuals. According to Section 306, both companies and other incorporated bodies may incur criminal liability under the rules of Part 5.

The general rules for the application of criminal law provisions are set out in Part 2 of the code. Section 6 stipulates that an act will fall within the Danish criminal jurisdiction if the act is committed:

  • within the Danish state;
  • onboard a Danish vessel or aircraft located within the territory of another state by a person belonging to or travelling on the vessel or aircraft; or
  • onboard a Danish vessel or aircraft located outside the territory of any state.

If the act is carried out by a person who is a Danish national or someone with Danish permanent residency or any similar habitual residence, the Danish criminal jurisdiction will also cover acts committed within the territory of another state (cf, Section 7 of the Criminal Code). This applies only if:

  • the act is also a criminal offence under the legislation of the country in which it was committed (dual criminality); or
  • the offender had the aforementioned attachment to Denmark when committing the act and that act:
    • comprised sexual abuse of children, human trafficking or female circumcision; or
    • was aimed at someone having the aforementioned attachment to Denmark when the act was committed.

International agreements

Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?

Denmark is a member of the Financial Action Task Force, both directly and as a result of EU membership.

Denmark is obliged to combat the fraudulent making of euros in the European Union under European Council Regulations 1338/2001 and 1339/2001.

Enforcement authorities

Which government authorities enforce the law on anti-money laundering, terrorism financing and fraud, and what is the extent of their powers?

The FSA supervises the financial sector as a whole, including currency exchange bureaux and money transfer businesses. The Gambling Authority supervises the gambling sector and the Business Authority supervises the remaining sectors covered by the law (eg, accountants and real estate agents).

The public authorities must supervise and inspect the undertakings under their supervision. Inspection reports must be made public in a summarised version. The authorities must also provide guidelines to the undertakings and relevant individuals in their sector.

Further, the Bar and Law Society (the industry body for Danish lawyers) is mandated by law to supervise lawyers.

The public prosecutor for serious economic and international crime is the Danish Financial Intelligence Unit. When it comes to terrorist financing, the relevant police unit is PET - the Danish Security and Intelligence Service. The Prosecution Service enforces the Criminal Code in cooperation with the police. It has the authority to prosecute and enforce Section 279 of the code through the Danish court system.

Statute of limitations

What is the limitation period for bringing actions in relation to money laundering, terrorism financing and fraud offences?

Danish AML legislation specifically mentions that the limitation period for bringing actions is five years from the time when the actual act in breach of the AML Act took place. This is in accordance with the general limitation period for financial matters, but is longer than for general legislation matters.

Regarding fraud, the limitation period rules are laid down in Part 11 of the Criminal Code. The code provides for limitation periods in accordance with the maximum term of imprisonment. The limitation period may be, respectively, two, five, 10 or 15 years. In relation to Section 279, the offence carries a maximum penalty of 18 months' imprisonment, with a two-year limitation period. In particularly aggravated cases, the sentence may increase to imprisonment for a maximum term of eight years and a 10-year limitation period. The limitation period is typically reckoned from the date when the fraud ceased.

Offences

Legal definition

How are 'money laundering', 'terrorism financing' and 'fraud' legally defined in your jurisdiction?

The definition of 'money laundering' in the Anti-money Laundering Act is:

  • to unlawfully receive or obtain for oneself or others a share in profits or means obtained through a criminal offence;
  • to unlawfully conceal, store, transport, assist in the disposal of or otherwise subsequently serve to ensure the economic profits or means obtained through a criminal offence; and
  • to attempt or participate in such actions.

The definition also covers arrangements made by the person who committed the offence from which the profits or means stem.

The 'financing of terrorism' is defined in Section 114b of the Criminal Code in regard to actions covered by Section 114. The code defines the financing of terrorism as direct or indirect financial support to the direct or indirect organisation, or raising of funds for or the making available of funds, other assets or similar services, directly or indirectly, to a person or group which commits or plans to commit acts that are considered to be acts of terror (as defined in Sections 114 and 114a).

'Fraud' is defined in Section 279 as follows:

A person is guilty of fraud if, by wrongfully creating, confirming or exploiting a mistake to obtain an unlawful gain for himself or others, he induces another person to perform or fail to perform an act and thereby inflicts a property loss on such other person or someone to whom the performance or failure becomes essential.

'Data fraud' is defined in Section 279a as follows:

A person is guilty of data fraud if he wrongfully edits, adds or deletes data or programs for electronic data processing or otherwise wrongfully attempts to influence the output of such data processing to obtain an unlawful gain for himself or others.

Principal and secondary offences

What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?

The principal offences in relation to money laundering are:

  • to unlawfully receive or obtain for oneself or others a share in profits or means obtained through a criminal offence;
  • to unlawfully conceal, store, transport, assist in the disposal of or otherwise subsequently serve to ensure the financial profits or means obtained through a criminal offence; and
  • to attempt or participate in such actions.

It also covers arrangements made by the person who committed the offence from which the profits or means stem.

The principal offence when it comes to the financing of terrorism is defined in Section 114b of the Criminal Code in regard to actions covered by Section 114. The code defines 'financing of terrorism' as direct or indirect financial support of the direct or indirect organisation, or raising funds for, or the direct or indirect making available of funds, other assets or similar services to a person or group who commits or plans to commit acts which are considered to be acts of terror (as defined in Sections 114 and 114a).

Regarding fraud, the main provision is found in Section 279 of the Criminal Code. The provision covers different types of fraud, including insurance fraud, credit fraud and match fixing, among others. Fraud relating to government benefits (eg, tax or customs) was previously also regulated by Section 279, but now most cases relating to benefit fraud are covered by Section 289 and Section 289a of the Criminal Code.

Section 279a of the Criminal Code criminalises data fraud. This provision was incorporated into the code in 1985 to cover, among other things, access to an IT system without permission (eg, hacking or abuse of access privileges to an IT system).

If the conditions of fraud are not met, it may be possible to punish a person under Section 298. The provision stipulates four different actions where a person may be fined or imprisoned for up to six months in cases which do not fall within Section 279. Another supplement to the fraud provision is Section 300a of the Criminal Code. If a person obtains an unlawful gain for themselves or others, and the action does not fall within Section 279 or Section 279a, the person may be guilty of breach of trust (cf, Section 280).

Predicate offences

How are predicate offences defined?

The range of offences in the definition of 'predicate offences' is not made specific. Any breach of the Criminal Code or other specific act which results in a person unlawfully receiving or obtaining for themselves or others a share in profits or means obtained through criminal offence is covered by the law.

De minimis rules

What de minimis rules apply to money laundering, terrorism financing and fraud offences?

There is no de minimis amount in Denmark below which money laundering or terrorist financing prosecution is not possible, nor is there an amount below which anti-money laundering or counter-terrorist financing due diligence does not arise where there is a business relationship.

Legislation envisages occasional transactions (where there is no business relationship) triggering customer due diligence when the occasional transactions reach €15,000. This amount has been lowered to €500 for currency exchange.

No de minimis rules apply in the context of fraud. Section 279 of the Criminal Code applies if there is a significant risk of property loss even if this loss has not yet manifested itself.

Penalties and plea agreements

Penalties

What penalties may be issued for money laundering, terrorism financing and fraud offences?

Penalties vary from fines to imprisonment. Due to the current political climate in Denmark, penalties are likely to be increased in the near future. There is a bill going through Parliament proposing an increase in fines.

Denmark has implemented new legislation regarding the 'fit and proper' assessment of the managers of financial undertakings according to which breaches of anti-money laundering legislation will have a direct influence on the final assessment.

As for fraud, penalties vary from fines to imprisonment, although fines apply only in minor offences. The primary penalty is imprisonment of up to 18 months. Sometimes the penalty can be more severe, resulting in imprisonment of up to eight years if the offence has been of a particularly aggravating nature. This may also be the case if the offence was committed jointly by several persons or due to the scope of the gain made or intended, or when several offences have been committed.

Plea agreements

Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?

Plea agreements are not possible under Danish legislation.

Defences

Available defences

What defences are available in your jurisdiction to parties accused of money laundering, terrorism financing or fraud?

There are no specific kinds of defence available in Denmark to parties accused of money laundering, terrorist financing or fraud. Hence, all the general defences - including self-defence - are available.

Record keeping, disclosure and compliance

Record-keeping and disclosure requirements

What record-keeping and disclosure requirements apply to companies and relevant individuals under the anti-money laundering, terrorism financing and fraud legislation?

Undertakings and relevant individuals must keep records for at least five years after the relevant incident (eg, transactions on a bank account and advice given by a lawyer or accountant). However, any record keeping must be compliant with both anti-money laundering (AML) legislation and data protection legislation.

Further, undertakings and relevant individuals are obliged to report to the Financial Intelligence Unit any suspicious transaction or attempt of same. In order for the Financial Intelligence Unit to investigate, the undertaking or relevant individual must be able to document the transaction. It is forbidden to tip off the customer or parties to the suspect transaction.

Some general requirements for financial record keeping and disclosure are set out in Section 296 and Section 302 of the Criminal Code regarding bookkeeping and accounting.

Compliance

What internal compliance measures are required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

The AML Act includes requirements for internal compliance (eg, an obligation for an AML responsible person in some undertakings). However, strict compliance measures are already imposed on financial undertakings under the general financial regulations.

Undertakings (and authorities) must use a risk-based approach when deciding how to put up effective preventive measures. Undertakings must have written procedures and guidelines which cover the business model as a whole, and all relevant employees must be educated in the procedures and guidelines. Public authorities are given a mandate to supervise internal compliance by conducting physical inspections or conducting desk reviews in undertakings.

In relation to fraud, the Criminal Code contains no provisions regarding internal compliance.

What customer and business partner due diligence is required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

All undertakings must conduct customer due diligence to identify and verify customers or business partners and their beneficial owners.

Under certain circumstances the customer is considered to be of enhanced or reduced risk and customer due diligence must be adapted accordingly. Limited risk could be where the company in question is a listed undertaking subject to the duty to disclose, whereas companies owned by trusts or other legal bodies with little transparency are subject to enhanced due diligence.

Private enforcement

Private actions

Can private actions be brought in your jurisdiction for damages arising from money laundering, terrorism financing or fraud? If so, who may file such actions and what filing procedures apply?

The Anti-money Laundering (AML) Act does not include specific provisions on private enforcement. Private enforcement must take place in accordance with the general Danish legislation on damages. The action might be taken to court or solved in an out-of-court settlement agreement.

Prosecution of civil claims in criminal cases is possible according to the Administration of Justice Act, which provides for the possibility of pursuing civil claims during the criminal proceedings if doing so does not cause considerable inconvenience. An example of filing a procedure could be that the wronged party claims compensation before the court and, in some cases, the Prosecution Service will then prosecute the civil claim if it does not cause considerable inconvenience.

How are damages calculated?

The court will decide on the right level of damages. In comparison with the courts' ruling on financial legislation as a whole, the damages awarded are generally higher for AML legislation breaches than for financial regulation in general.

What other remedies may be awarded to successful claimants?

Not applicable.


Source: https://www.lexology.com/library/detail.aspx?g=b865887f-e6a4-47ca-b5be-40da49d086a0