Bank Breach

Shelved IT Overhaul Might Have Opened Door for Illegal Transactions



A branch of Denmark's Danske Bank in Tallinn, Estonia

Dankse Bank A/S came under scrutiny for failing to prevent suspected money laundering at its Estonian branch, and a shelved IT project may be to blame. A recent internal investigation found that a branch based in Tallinn, Estonia was likely used to carry billions of U.S. dollars' worth of laundered funds from ex-Soviet states and Russia.

The same report found that a failed IT integration helped facilitate the laundering scheme. The bank had dropped the planned integration with the main IT platform in 2008, citing a ballooning project budget and a lack of required resources. Instead, the Estonian branch relied on its own IT platform for the past decade, which was independent from the monitoring systems of the rest of the Danish bank. This lack of integration let transactions that may have been flagged in the main system fly under the radar.

Abandoning that project has now become a costly decision for the financial institution. “That sort of integration is difficult, but it's something that has to be done, and at some point it can't be an excuse,” Matthew L. Schwartz, a partner at the firm Boies Schiller & Flexner LLP, told Morningstar.



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