Statement on inspection in Folkesparekassen (money laundering area)
In March 2021, the Danish Financial Supervisory Authority inspected Folkesparekassen. The inspection was an investigation of the money laundering area.
The inspection included the Savings Bank’s risk assessment, policies and business procedures in the money laundering area. The inspection also included Sparekassen’s customer knowledge procedures for both private and corporate customers. In addition, the inspection included the Savings Bank’s monitoring of customers, including compliance with the inspection, listing, storage and notification obligations. Finally, the inspection included the Savings Bank’s measures for compliance with sanctions as well as internal controls.
Risk assessment and summary
Sparekassen was founded as a lending community in 1983 as an alternative to ordinary banks. At the time of the inspection, Sparekassen had three branches in Århus, Odense and Silkeborg, respectively, where the latter is also Sparekassen’s head office. The savings bank was characterized by running a regular banking business and offered i.a. deposit accounts, payment services, lending and mortgage credit through cooperation with Totalkredit. At the time of the inspection, Sparekassen had approx. 9,200 customers, of which approx. 7,900 private and approx. 1,300 business customers including associations. Sparekassen had a total of 21 employees. Sparekassen primarily operated banking in the local areas of Silkeborg, Odense and Århus, but Sparekassen had customers throughout Denmark.
The Danish Financial Supervisory Authority assessed that Sparekassen’s inherent risk of being used for money laundering or terrorist financing was normal to high assessed in relation to the average of financial companies in Denmark. In the assessment, the Danish Financial Supervisory Authority had placed special emphasis on the fact that Sparekassen primarily had Danish customers residing in Denmark, but conversely, Sparekassen has a number of association customers and a few customers who were connected abroad, including high-risk third countries.
On 15 June 2021, the Danish Financial Supervisory Authority received a letter from Sparekassen stating that Sparekassen would be merged with Middelfart Sparekasse with the latter as a continuing bank. The merger took place on 1 September 2021, after which Middelfart Sparekasse is a continuing bank. Folkesparekassen then began to transfer customers to Middelfart Sparekasse, after which all customer transactions will in future take place through and with the IT system, which consists of Middelfart Sparekasse. The merger of the two banks does not affect the Danish FSA’s inspection report and the derivative supervisory reactions. As Folkesparekassen has become part of Middelfart Sparekasse, it is thus Middelfart Sparekasse that is responsible for handling the supervisory reactions that Folkesparekassen has received from the Danish Financial Supervisory Authority.
Based on the inspection, there are a number of areas that give rise to supervisory reactions.
Sparekassen has been instructed to revise its business procedures so that Sparekassen includes all relevant information about the customer in the risk classification of this and to revise its business procedures for stricter customer knowledge procedures, so that it appears what more information on the customer the company must specifically obtain. Sparekassen must also expand its business procedures to include customer due diligence procedures if a customer’s relevant circumstances change. Sparekassen must also revise its business procedures for inspection, listing, notification and storage, so that alarm processing and notification are correct and efficient.
Sparekassen has also been instructed to carry out renewed customer due diligence procedures when the customers’ relevant circumstances change.
The Savings Bank has also been instructed to obtain identity information on the beneficial owner (s) and to take reasonable steps to verify the identity of the beneficial owner or owners, so that the Savings Bank knows with certainty who the beneficial owner or owners are. The Danish FSA also instructs the Savings Bank to ensure that it obtains information about the purpose and intended nature of the business relationship.
Sparekassen has been instructed to monitor whether customers ‘transactions are in accordance with Sparekassen’s knowledge of customers and customers’ business and risk profile, including, if necessary, the origin of the funds, and to ensure that documents, data or information about customers are continuously updated.
Sparekassen has also been instructed to carry out stricter customer awareness procedures in the customer relationships where Sparekassen assesses that there is an increased risk of money laundering and terrorist financing.
Sparekassen has been instructed to investigate the background and purpose of all complex and unusually large transactions as well as all unusual transaction patterns and activities that do not have a clear economic and demonstrable legal purpose in order to determine whether there is reason to believe that these have or have been linked to money laundering or terrorist financing and to ensure that the investigation takes place immediately. Sparekassen has also been instructed to note and store the results of Sparekassen’s investigations.
Furthermore, the Savings Bank has been ordered to notify the Money Laundering Secretariat immediately if the Savings 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 same applies in the event of suspicion that has arisen in connection with the customer’s attempt to make a transaction, or an inquiry from a potential customer with a desire to carry out a transaction or activity that may be related to money laundering or terrorist financing.
Finally, the Savings Bank has been instructed to carry out internal controls with appropriate frequency, which ensures that the Savings Bank effectively prevents, limits and manages the risk of money laundering and terrorist financing, including that the Savings Bank can document the checks carried out. This includes in particular a check of the Savings Bank’s association’s real owners, and also the Savings Bank’s alarm processing and notification.