A huge fine turns out to be a pure joke!
København Andelskasse (now FS Finans VI A/S), which was heavily involved in facilitating cybercrime activities from 2016 to July 2018, has been fined 794 million DKK (€103 million) for laundering billions on behalf of international cybercriminal organizations.
While this substantial penalty – reached after a six year criminal investigation and agreed upon through a court settlement with the Danish National Unit for Special Crime (NSK), appears significant, it will never actually be paid. Under the bail-in rules established in the Act on the Recovery and Resolution of Certain Financial Institutions (RAL), København Andelskasse is legally exempt from making the payment.
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Background about FS Finans VI A/S (formerly Kobenhavn Andelskasse)
After an eventful history and a devastating inspection report by the Danish supervisory authority the Danish Financial Supervisory Authority finally revoked the banking license of Københavns Andelskasse due to severe irregularities, particularly in the area of AML controls in September 2018. The state-owned resolution entity, Finansiel Stabilitet, subsequently took over the institution, renaming it FS Finans VI A/S.
Since 2020, EFRI has been reporting extensively on the massive money laundering activities facilitated by København Andelskasse (nowadays FS Finans VI A/S). From 2016 until the summer of 2018, FS Finans VI A/S next to Deutsche Handelsbank became the go-to institution for unscrupulous payment service providers—both licensed and unlicensed—seeking bank accounts to support their international laundering activities.
The KBH Indictment
According to media reports and the announcement of the Dutch NSK (NATIONAL UNIT FOR SPECIAL CRIME) the indictment for the bank detailed the following systematic compliance failures between January 2017 and September 2018:
Count 1: Lack of Internal Controls
From January 1, 2017, to September 12, 2018, in Københavns Andelskasse, CVR no. 82112219, Gammel Torv 4, 2nd floor, Copenhagen, conducting business as a financial institution without establishing sufficient written procedures for internal control to effectively prevent, mitigate, and manage risks related to money laundering and terrorist financing. Specifically, Københavns Andelskasse failed to include adequate independent controls within its business procedures to ensure adherence to company policies and operations, nor was there sufficient monitoring to confirm the controls were performed appropriately.
Count 2: General and Enhanced Customer Due Diligence Procedures
From January 1, 2017, to September 12, 2018, in Københavns Andelskasse, deliberately engaged in business relationships with customers listed in Annex A (30 customers) and processed 31,490 incoming transactions amounting to a total of DKK 3,177,185,489 without adequate knowledge of the customers, as:
- No information was gathered about the purpose and intended nature of the business relationships.
- No identification details were obtained regarding the ownership and control structures of the companies, including beneficial owners.
- Ongoing monitoring of the established business relationship was not conducted.
- Customer due diligence procedures were not based on risk assessments.
Count 3: Failure to Investigate and Report
From April 21, 2017, to September 12, 2018, in Københavns Andelskasse, deliberately processed 27,139 incoming transactions amounting to a total of DKK 2,586,283,592 (346.677.514,28 €) for customers Moorwand Ltd., UPC Consulting Ltd., and Tribe Payments Ltd. (listed in Annex B) without adequately investigating the purpose of the customers’ transactions. Additionally, findings from such investigations were not sufficiently recorded or stored, and suspicious transactions were not promptly reported to the Anti-Money Laundering Secretariat, nor were the transactions halted despite:
- Lack of customers’ business connections to Denmark.
- An increasing number of SWIFT messages raising objections to incoming transactions for Moorwand Ltd. and UPC Consulting Ltd.
- Københavns Andelskasse’s correspondent bank, Arbejdernes Landsbank, terminating collaboration, citing issues with many of Andelskasse’s customer transactions triggering fraud concerns.
- Non-utilization of the bank’s monitoring system from August 2017 to February 2018.
- The volume, size, and nature of the transactions raising suspicions of involvement in money laundering or terrorist financing.
A hefty fine turns out as a joke.
As of the end of November 2024 (after six years of investigation), the Danish prosecutor in charge and Finansiel Stabilitet agreed on the (fictitious) penalty of DKK 794, 296 500 (€ 106 471.2017,21) for laundering hundreds of millions.
Finansiel Stabilitet was established after the financial crisis with the aim of taking over the business of distressed banks in order to wind them up in the best possible way.
Already the settlement agreement notes that FS Finans VI A/S is legally precluded from paying the fine due to the bail-in rules under the Act on the Recovery and Resolution of Certain Financial Institutions (RAL).
Similarly to the results of the criminal investigation for PAYVISION B.V. (a Dutch cybercrime enabler acting as acquirer for transnational cybercriminal organizations for about a decade) and Deutsche Handelsbank, shutting down operations appears to be an effective strategy for avoiding serious consequences for both the legal entity and its shareholders. At least in Denmark, the authorities attempt to uphold the rule of law. In contrast, the Dutch prosecutor made no effort to uphold the rule of law, failing to impose even a symbolic fine on Payvision, which also had already ceased operations after being caught to be heavily involved in cybercriminal activities.
What about consequences for KBH´s executive board and KBH´s former owner Clearhaus A/S?
A recent media report confirms rumors of ongoing criminal proceedings against the former executive board But no one talks about Clearhaus A/S. According to the KBH report issued by FSA in early September 2018, Clearhaus A/S was massively involved in KBH’s day-to-day business.
It will be interesting to see how this case unfolds regarding fines for the former executive board and how it compares to penalties for large-scale money laundering in the Netherlands—for instance, the laughable €330k fine issued for systematic non-compliance with AML rules for the former Payvision board members. But you never know; everything is possible in Europe regarding AML enforcement actions.
