Danish FSA: Money Laundering in Denmark

One of the largest and wealthiest economies in Europe and the world, Denmark is home to a diversity of business interests including numerous international enterprise organizations. While Denmark’s status as a business hub has contributed to economic growth, it also has made it a target for criminals seeking to commit financial crimes such as money laundering and terrorism financing. In order to protect the financial system and its participants, Denmark has introduced a strict anti-money laundering and counter terrorist financing regime, which is overseen by its primary financial regulator: the Financial Supervisory Authority (FSA) – known in Danish as Finanstilsynet. In order to avoid both financial and criminal penalties, banks, financial institutions, and other obligated firms that do business in Denmark, must understand their AML/CFT obligations and how to operate in compliance with rules set out by the Danish FSA.

What is the Danish FSA?

The Financial Supervisory Authority Denmark was established in 1988 as a merger of the Supervisory Authority for Banks and Savings Banks, and the Insurance Supervisory Authority, and has operated under the authority of the Ministry of Economic and Business Affairs since 2001. The Danish FSA’s stated role is to conduct ‘supervision of financial undertakings’ in Denmark, with the aim of “promoting financial stability and confidence in financial undertakings and markets”. The FSA’s mission statement outlines three areas in which it makes supervisory contributions to the financial sector:

Counteracting threats to Danish financial undertakings
Assessing the viability and safety of financial products and services
Taking a systemic approach to financial supervision

What are the responsibilities of the Danish FSA?

In practice, the FSA monitors companies operating within its jurisdiction in order to ensure compliance with financial regulations, such as the country’s primary AML/CFT law: the Act on Measures to Prevent Money Laundering and Financing of Terrorism – known in Danish as Hvidvaskloven. In its supervisory role, the Danish FSA is responsible for the conduct of all banks, investment companies, insurance companies, currency exchange companies, and cryptocurrency companies operating within the country. The FSA also works with the Danish government to develop new financial legislation and communicates with financial institutions across the country to promote understanding and uptake of those laws. 

The Danish FSA is led by its Governing Board and organized into four divisions each responsible for a specific aspect of the Danish financial system: 

• Credit Institutions Supervision
• Financial Crime and Conduct Supervision
• Insurance and Pensions Supervision 
• Capital Market Supervision 

Since Denmark is part of the European Union, the FSA is part of the European Securities and Markets Authority (ESMA), and works to harmonize financial regulation across the block. Denmark’s treaty with the EU means that it is not required to implement all centralized legislation: accordingly, Denmark will not adopt the AML/CFT regulations mandated by the EU’s 6th Anti-Money Laundering Directive.

How to comply with Danish money laundering regulations

Following Financial Action Task Force (FATF) guidance, the Danish FSA requires firms in Denmark to take a risk-based approach to AML/CFT compliance. This means that firms should develop internal compliance programs, and conduct risk assessments of their customers in order to deploy AML/CFT measures in proportion to the criminal risks that they present. 

Accordingly, in order to comply with Denmark money laundering regulations, firms should implement the following measures and controls as part of their AML/CFT programs: 

• Customer due diligence: Danish firms must establish and verify the identities of their customers by conducting suitable customer due diligence (CDD) and obtaining identifying data such as names, addresses, birth dates, and company incorporation documents.
• Transaction monitoring: Danish firms should monitor their customers’ transactions for activity that does not fit their risk profile, and that might indicate they are involved in criminal activity. 
• Sanctions screening: Danish firms should use sanctions screening software to check their clients against global sanctions and watch lists, including the EU Consolidated List and the UNSC Consolidated List. 
• Politically exposed persons: Elected and government officials are considered politically exposed persons (PEP) and pose a greater Denmark money laundering risk. Accordingly, firms in Denmark should check their customers to establish their PEP status. 
• Adverse media: Danish firms should monitor for their customers’ involvement in negative or adverse media stories that might indicate they are involved in criminal activities. Adverse media monitoring should take in both traditional screen and print media and online news sources.