It may go too far to say things are looking up for Danske Bank, but the institution was handed a significant victory when the Southern District of New York dismissed an investor lawsuit on August 24, 2020. As we blogged about here, here, here, and here, Danske Bank has been the subject of significant regulatory oversight, which has resulted in a foreseeable onslaught of investor lawsuits.
One such class action securities suit was brought by purchasers of DB American Depository Receipts against Danske and its former officers and board members over alleged misrepresentations about the bank’s financial condition in light of the now well-known anti-money laundering (AML) deficiencies in its Estonia branch, as well as the subsequent fallout. The suit relies heavily on the September 19, 2018 Bruun & Jhejle investigative report, which outlined various internal whistleblower complaints about the Estonia branch’s AML controls that were confirmed by a published audit by the Danish Financial Supervisory Authority. Subsequent investigations followed, including by U.S. authorities, resulting in significant financial blows to the bank.
The Court found that the plaintiffs not only had failed to meet the heightened pleading requirements regarding mental state for securities fraud claims, but had not even alleged facts sufficient to allege a material misrepresentation. The decision reflects the potential difficulty of alleging (much less proving) a successful securities fraud claim based on alleged AML failures, particularly because it arises out of the globe’s largest and most notorious money laundering scandal.