Nordea bank has blocked 68 suspicious accounts and said its Luxembourg branch will no longer help customers run offshore structures, following an internal investigation in the wake of revelations in the Panama Papers.
The leak of millions of documents from the leading Panama-based law firm Mossack Fonseca in April this year indicated that Nordea had worked with the firm to help clients set up as many as 400 offshore companies. The structures can be used by clients to conceal their wealth and illegally evade tax.
On Wednesday Nordea’s independent probe reported that, as of April this year, the bank’s Luxembourg branch had 129 offshore structures on its books, holding 216 million euros in total, which were incorporated in Panama and/or administered by Mossack Fonseca.
But the investigation said there was no evidence that Nordea employees initiated the establishment of offshore structures, nor that they proactively contributed to customers’ potential tax evasion.
Most of the 68 suspended accounts, which are now being investigated as to whether the owners adhered to Nordea’s policies on tax evasion, date from the period before 2013, the report said.
In total, five customers who are Nordic residents were singled out for further investigation.
Nordea also reviewed the Russian management’s ownership of private offshore structures, and found evidence that these structures have been reported to the relevant tax authorities as required by Russian law. The review has identified one case in breach of the code of conduct in Nordea Bank Russia related to advice.
Under the branch’s own ethical code, which goes beyond what is required by Luxembourg law, Nordea employees must reasonably ensure that customers comply with relevant tax laws, were not consistently implemented. The review found that in 23 out of 137 cases, Nordea employees failed to obtain sufficient evidence of tax compliance at the time of opening the accounts.
The review also found that internal policy was not followed in cases of updating customer files, due diligence, renewing power of attorney, though said that this was unlikely to have been illegal.
Nordea’s president and CEO, Casper von Koskull, said that the bank had introduced new, stricter policies in 2009 which went beyond what was required by law. “However, I’m disappointed that the investigation shows that the implementation was insufficient,” he said. “I want to be absolutely clear. We do not accept Nordea being used as a platform for tax evasion or aggressive tax planning.”
Von Koskull announced a range of tougher tax-reporting requirements and tighter procedures in the wake of the findings, including stricter governance of its Luxembourg operations. He said the bank will in future say no to all new company structures where the business purpose is not clear.
The bank had previously announced it will cut all interaction with Mossack Fonseca by the end of 2016, and says its Luxembourg branch will will no longer assist customers with the administration of offshore structures neither with Mossack Fonseca nor with other corporate service providers.
In the wake of the Panama Papers’ suggestion of Nordea’s involvement in tax evasion practices, a string of Finnish political parties and trades unions distanced themselves from the bank, announcing they had closed down their Nordea accounts. Politicians in Finland and Sweden mounted growing attacks on the bank - the largest in the Nordics – leading to top management publicly apologising for previous mistakes.
In Sweden the financial regulator had handed Nordea a 5.4 million euro fine in 2015 for ignoring money-laundering regulations.