ACCM4500: Management Accounting 2 - Case Study of Danske Bank Scandal

This report analyzes the Danske Bank money laundering scandal, which involved significant financial irregularities and criminal investigations. The case study examines the weaknesses and challenges faced by Danske Bank, including weakened capitalisation, profitability, and refinancing, as well as legal issues related to money laundering. The report explores the impact of the scandal on the bank's shares and the role of key executives. The study proposes the use of a balance scorecard as a strategic tool to address the problems of mismanagement of finance and fund, improve reporting, and track key performance indicators. The report also discusses the factors affecting the value of shares, and the importance of transparency, and strategic changes. The report concludes by outlining the importance of creating and implementing balance scorecard to address the issues. The report includes references to relevant financial publications and academic research to support its findings and recommendations.

MANAGEMENT ACCOUNTING 2

Memorandum
To the board of directors
Date- 10/09/2019
Case- Danske Bank strived to restore faith after the involvement in relation to damaging of
money laundering
Case
Stephen Engels has faced overhauling by the lenders of Danish to restore the trust after the
involvement while damaging the scandal of money laundering. Danske bank is under severe
investigation in US and many other nations for the payment totalled at 200 billion euros
through small Estonian branch. Danske has joined largest bank of Denmark where CEO
Jesper has found that Danish customers overcharged for the proposed investment product for
the attempt to maintain a gap between a thin lines in regaining trust from investors as well as
customers (Financial times, 2017). Danske`s shares started declining near to 65 percent where
money laundering scandal that began to remain unfold by rocking investor`s confidence and
the prompt the investigations in the world. On the ground of CEO`s role who has insufficient
experience, Danske undertakes to view the bank`s Swedish operations that finally take over
as a new head of the wealth management but the financial regulators are blocked (Moody
investor bank, 2017). Danske bank has been seeking restoration of control and trust in the
biggest banking system after the huge money laundering scandals, which lead to criminal
investigations in US, Estonia and France both for chairperson as well as chief executive. The
new executive with the board of directors that has been rejected by the regulators of Danish
who will move from wealth management in order to head towards the banking activities
(Moody investor bank, 2017). It is seen that there is a need to quickly create several resources
and finally increase the cost efficiency. During the scandal, CEO drew several criticism for

the analysts that can recommend board of directors to the shareholders during the scandal
(Financial times, 2017).
Weaknesses and challenges
With low experienced credits and challenges, it is seen that the bank has weakened
capitalisation, weakened profitability, and weakened refinancing. The bank will come up with
weakened following of operating environment and lack of proper legal and institutional
frameworks. The assessment dealt with large stock of loans because of financial crisis and the
high household debt. The financial sector will consider the wholesale funding needs that has
reduced and created susceptibility even in the adverse events. One of the major challenge
faced by Danske bank underwent full engagement with the criminal prosecution over the
allegation breaches related to crime laws financially. Many legal issues in relation to money
has to overview class action lawsuits in its results. The plaintiffs in civil cases have claimed
that the directors of bank hid scale to identify the nature of money laundering issues from the
marketplace. The drop cost is near to 10 billion euros to the investors. ADR allows the
investors as the same level of economic rights owning to underlying shares inclusive of
ability in order to deal and trade ADR in market. Danske bank has sold the shares to the
American brokers turning the deposition of shares with the US depository banks. The
institution will issue broker depository receipts to either sell or buy them, as it will receive
dividends from the underlying shares. The rate of ADR is directly linked to the valuation of
underlying shares. The main factors that have affected the value of the shares is the state of
the economy, new laws, regulations, new products, staff shortage, and new technology that
could affect the valuation of ADR as news of criminal investigations and regulatory will
affect the organisation (Murray, 2016).

The action related to lawsuits alleges where Danske bank was aware in 2014. The nature of
the inappropriate compliances, which lead to super profits that bank cited in the financial
disclosures without considering related doubtful account activity. The class action states that
Danske bank failed to disclose where whistle-blower reporting to money laundering
(KYC360, 2017).
Resolutions that can solve the problems
By using the balance scorecard, the problem of mismanagement of finance and fund can be
managed (Naheem, 2017). A balance scorecard is a strategic planning tool and a system of
management, which an organisation can use to communicate and accomplish. It is important
to align day-to-day work that is done by everyone to comply with the strategy (Pedersen,
2019). Monitor and measure the progress for the strategic targets by prioritising products,
projects and the services. The relative four perspective of balance scorecard establishes cause
and effect logic on the strategy mapping including elements such as customer, finance,
internal processes, growth and learning perspectives (Pedersen, 2019).
The use of balance scorecard will help the company to create transparency for danske bank.
One has to create and implement balance scorecard that will assist to help to solve the issue
(KYC360, 2017). It can avail direction through which an employee can affect change and
finally create values to their roles. Danske bank has to improve reporting on the part of top-
level management and consider company`s performance as being affected by internal
processes, people and customers (learning and growth) (Pedersen, 2019). Balance scorecard
is able to find the factors, which hurt the business and finally outline several strategic changes
bringing into better results. The tool is used to track huge variety of the measures with other
information. The tool will bring important data for leadership team to foresee it in a

centralised location by giving a brief of how organisation is running. One can drill down from
any level of departments and divisions by using a consistent framework (KYC360, 2017).

References
Dreżewski, R., Sepielak, J. and Filipkowski, W., 2015. The application of social network
analysis algorithms in a system supporting money laundering detection. Information
Sciences, 295, pp.18-32.
Financial times, (2017) Danske: anatomy of a money laundering scandal. Available on:
https://www.ft.com/content/519ad6ae-bcd8-11e8-94b2-17176fbf93f5 [Accessed on:
11/09/19]
KYC360, (2017) Danske Bank’s Other Legal Problems. Available on:
https://www.riskscreen.com/kyc360/article/danske-banks-other-legal-problems/ [Accessed
on: 11/09/19]
Moody investor bank, (2017) Danske Bank A/S. Available on:
https://danskebank.com/-/media/danske-bank-com/file-cloud/2017/8/moodys-full-report---
august-2017.pdf [Accessed on: 11/09/19]
Murray, K., 2016. In the shadow of the dark twin–proving criminality in money laundering
cases. Journal of Money Laundering Control, 19(4), pp.447-458.
Naheem, M.A., 2017. Suspicious alerts in money laundering–the Crédit Agricole
case. Journal of Financial Crime, 24(4), pp.691-703.
Pedersen, J., G., (2019) Danske Bank poaches Commerzbank finance chief in post-scandal
shake-up. Available on: https://www.reuters.com/article/us-commerzbank-cfo/danske-bank-
poaches-commerzbank-finance-chief-in-post-scandal-shake-up- [Accessed on: 11/09/19]