Rounds of Suits for Danske

January 24, 2020 3 minute read

Westpac insists that business is fine despite the scandal, Isabel dos Santos is charged with money laundering and Danske is facing more troubles.

We share our financial regulatory highlights from the week of 20 January 2020

Westpac Signals Strength Post-Scandal

John McFarlane has been appointed as the new Chairman of Australian bank Westpac following the removal of the CEO and Chairman who oversaw the bank while it accumulated an overwhelming 23 million money laundering breaches.

The seasoned executive is upbeat regarding the bank’s troubles, commenting that the bank is: “in really good shape apart from some sustained damage on the regulatory side”. It’s a positive message for the company but underplays just how significant regulatory upkeep is.

Westpac’s failing saw it linked with pedophile transactions and receive condemnation from the Australian Home Affairs Minister, Peter Dutton who said the breaches gave “a free pass to pedophiles.”

However, McFarlane has spent approximately 27 years of his career working on troubled businesses so his placement by the board is a fitting hire for a business that recently made headlines for the severity and frequency of its failures. McFarlane was recently heading up ANZ Bank in Melbourne, which he did successfully for a decade and is used to dealing with the regulator.

That experience will be key for Westpac’s future as how the facts of the breach are agreed will be instrumental for any settlement agreement. AUSTRAC is chasing landmark fines which could easily exceed AUS$1.25 billion.

Isabel dos Santos and the Luanda Leaks

Angolan billionaire and former first daughter, Isabel dos Santos is now facing charges of money laundering, mismanagement and fraud. The Luanda Leaks have revealed that dos Santos used Angola’s state revenue as the foundation for her $1.82 billion fortune. An action that has seen Angola left impoverished.

Dos Santos was appointed as the head of Angola’s state-owned oil-firm Sonangol during her time as first daughter of Angola. It’s believed that she may have used hundreds of companies, mainly found in tax havens, to funnel money from Sonangol and other state enterprises into her pockets.

Isabel dos Santos left Angola when her father stepped down from power and her mismanagement of Sonangol was soon revealed by her successor.

“The Princess” as dos Santos was known in Angola, is not the only suspect involved in plundering Angolan state resources. There are five suspects under investigation by Angola’s state authorities but unfortunately all of them are currently abroad.

This story is an interesting revelation of how deeply corruption can damage a nation and it remains to be seen if Isabel dos Santos and her compatriots had committed state capture on a similar scale to the Gupta family in South Africa. There are many parallels between the two stories and with more information being uncovered by the Luanda Leaks each day there’s plenty of time for further scandal to come to light.

Rounds of Suits for Danske

Danske bank is facing a fresh set of troubles in the fallout from its money laundering scandal.

Investors have filled rounds of lawsuits against the embattled bank as they claim to have lost at least a billion dollars from share prices plummeting. The suits have come in two rounds, one claiming $800 million from 232 companies and another claiming $225 million from 63 companies.

However, this is unlikely to be the full extent of the claims against Danske, as other law firms have suggested that further lawsuits will be filed in the future. The bank is under investigation by authorities in the USA, Estonia and Denmark and saw its share price crash by over 46% in 2018 alone.

The suits have been filed in Copenhagen, a jurisdiction that rarely sees shareholder lawsuits made against public companies result in settlements. This legal fracas could see further financial and reputational damage done to Danske, as a lengthy trial is likely to result in news coverage and extensive discussion in court.

The scale of the claim reveals an unusual punishment to failing to maintain compliance, usually regulatory fines and reputational damage are the only significant threats. But now we can see as it happens that shareholders will also punish compliance failure due to market forces costing them significant dividends.