Statement on inspection in Saxo Bank A / S (money laundering area)
In June 2019, the Danish Financial Supervisory Authority inspected Saxo Bank A / S. The inspection was an investigation of the money laundering area as part of the ongoing supervision of the company. The inspection included the company’s risk assessment, policies, business procedures, customer due diligence procedures, monitoring of customers and notifications to the Money Laundering Secretariat.
Since the implementation of the inspection in 2019, the Danish Financial Supervisory Authority has had a longer subsequent dialogue with the bank regarding matters found during the inspection, cf. the date of the report.
Risk assessment and summary
Saxo Bank A / S is a global investment bank headquartered in Denmark. The bank has a large international presence, where the bank is represented with subsidiaries, representative offices and branches in 16 countries, from which the bank serves customers from more than 160 countries.
Saxo Bank specializes in online trading and investing in the international capital markets through the bank’s online trading platforms. The bank offers trading in, among other things, currencies, equities, CFDs, options, futures, ETFs and bonds. The trading platform is made available to the bank’s direct customers as well as indirect customers via one of the bank’s wholesale partners, so-called White Label Clients (WLCs).
The Danish Financial Supervisory Authority assesses that the bank’s inherent risk of being used for money laundering or terrorist financing is highly assessed in relation to the average of financial companies in Denmark. In the assessment, special emphasis is placed on the bank being represented globally, including in several high-risk countries, while at the same time the vast majority of their customers are remote customers, as they are onboarded digitally without physical attendance. In the assessment, emphasis has also been placed on the fact that the customer relationship with the bank’s WLCs is associated with high risk, as the bank’s indirect customers via a WLC only need to be known by the WLC itself.
Based on the inspection’s observations, there are a number of areas that give rise to supervisory reactions. In view of the time that has elapsed since the inspection was carried out, conditions in the bank may have changed in the meantime.
The bank is instructed to prepare a risk assessment covering both money laundering and terrorist financing, based on the bank’s business model, which includes an assessment of the risk factors associated with customers, products, services and transactions as well as delivery channels and countries or geographical areas where business activities are carried out.
In addition, the bank is instructed to revise the bank’s money laundering policy so that it adequately constitutes a strategic management tool for management and clearly contains the principled decisions on how the bank should be set up so that the risks of money laundering and terrorist financing are met.
The bank is instructed to ensure that there is the necessary independence between the transaction monitoring and compliance function, so that the first and second lines of defense do not refer to the same manager.
The bank is instructed to ensure that the Executive Board must take the measures deemed necessary to ensure that the bank’s decision-making process is in accordance with the framework, guidelines and policies set by the Board of Directors. The bank is also instructed that the Executive Board must ensure that the Board of Directors’ established policy on the prohibition of third-party payments is complied with and implemented.
The bank is also instructed to ensure that the internal processes are organized in such a way that the money launderer’s authority to make decisions concerning the bank’s exposure in the money laundering area cannot be limited.
In addition, the bank is ordered to notify SØIK immediately when the bank is aware of, suspects or has reasonable grounds to suspect that a transaction, funds or activity has or has been linked to money laundering or terrorist financing.
The bank is reprimanded for not having sufficiently clarified ownership and control structure as well as obtaining identification information and checking the identity of the real owners of individual customers.