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Nordea: Management comment on the report regarding the investigation of Nordea Private Banking

Following the so-called Panama Papers Nordea's President and CEO,
Casper von Koskull, initiated an internal investigation to conclude
whether Nordea Bank S.A. in Luxembourg (NBSA) has adhered to internal
rules and external regulations regarding activities related to
offshore structures. The investigation has now been completed and
presented to Nordea's Board of Directors. All relevant supervisors
have been or will be informed of the findings. Nordea has decided on
a number of actions to immediately address key conclusions and the
recommendations made by the investigation.

Facts about the investigation:

The internal independent investigation has been led by Nordea Group
Compliance and Nordea Group Operational Risk with advice and support
from Mannheimer Swartling as well as local auditing and law firms.

The scope of the investigation has been offshore structures which are
either administered by the law firm Mossack Fonseca and/or
incorporated in Panama and which had a customer relationship with
Nordea Bank S.A. in Luxembourg (NBSA) at 15 April 2016:

- On 15 April 2016 NBSA had 129 offshore structure customers in scope
for the investigation, out of the total number of 562 offshore
structures in NBSA.

- In addition, 16 structures in Nordic Private Banking have been

- The tax part of the investigation has covered the full period
2010-2016 for which 137 structures have been in scope, but a few of
these were closed before 15 April 2016.

- Total assets under management in the 129 structures amount to EUR
216m. Five of the structures have beneficial owners resident in the
Nordic region.

In addition, the Swedish law firm Mannheimer Swartling has been
appointed by the Group CEO and Board of Directors of Nordea Bank AB
(publ) to make a separate review in order to conclude how the
management and the board of NBSA have managed their duties in
relation to the operations of offshore structures from a governance
and risk management perspective.

Key conclusions from the internal investigation:

· The investigation concludes that NBSA has offered administrative
services to customers, but it has neither found evidence that
employees have initiated the establishment of offshore structures,
nor that they have proactively contributed to customers' potential
tax evasion.

· NBSA has had relevant policies and instructions in place, eg
related to Know Your Customer (KYC), Anti Money Laundering (AML), tax
reporting and tax compliance, and complied with both Nordea Group
Directives, Luxembourg legislation and ICMA guidelines.

· Separately from the Private Banking investigation, Nordea has also
reviewed the Russian management's ownership of private offshore
structures. We have found no evidence of any violations of Nordea's
internal policies in relation to establishing or maintaining such
structures. Documents provided by the employees also support 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

· The Code of Ethics decided by NBSA in the autumn of 2009, reaching
beyond what is required by Luxembourg law and stipulating that Nordea
employees must reasonably ensure that customers comply with relevant
rules for declaration and taxation, has not been consistently
implemented. The instructions for how to document adherence to the
policy have been insufficient.

· At the time of customer onboarding NBSA has had sufficient
evidence of tax compliance in accordance with the Code of Ethics in
114 of the 137 offshore structures.

· After onboarding there are various signs of a different nature in
68 of the customer files from 2010-2016 that require further analysis
to confirm that the beneficial owners of these structures have
adhered to Nordea's policies regarding tax evasion. Most of the cases
refer to the period before 2013.

· The investigation has reviewed 21 Private Banking customers (5 in
NBSA and 16 in Nordic Private Banking) who are Nordic residents with
an active offshore structure during 2010-2016. Among these customers
there are five cases that require further analysis.

· The investigation has found that many of the reviewed KYC files
fall clearly below the standards set forth in the Group's policy.
This is mainly related to the so-called enhanced due diligence (EDD)
required for high-risk customers. The regulation also stipulates that
all customer files need to be updated on a regular basis, the
so-called ongoing due diligence (ODD), which in the files
investigated has not been the case to a sufficient degree. An
improvement has been noticed in recent years.

· The investigation has found seven cases where renewal of Powers of
Attorney have not followed internal policies, but all criteria
required for this to be defined as illegal are likely not met; ie
employees have not had a clear benefit or illicit advantage of

Statement from the Swedish law firm Mannheimer Swartling:

Based on the review, Mannheimer Swartling has concluded that
deficiencies exist related to the governance and control structures
in NBSA. In view of the results of the internal independent
investigation carried out by Nordea Group Compliance and Group
Operational Risk, it is clear that certain deficiencies related to
AML and tax issues exist in NBSA. While the board and the executive
management of NBSA have been aware of the operations associated with
offshore structures and also identified certain associated risks
related to AML and tax issues, they have not viewed, identified or
addressed offshore structures as such entailing specific risks or
received reports from eg the risk and capital or compliance functions
of any such risk.

"We believe that the insight we have obtained during the independent
internal investigation carried out by Nordea Group Compliance and
Group Operational Risk is sufficient and appropriate to provide a
basis for our judgment that it has been completed with high
professionalism in defining the scope, methodology, structure and
documentation of findings, that the conclusions in a good way reflect
the fact findings and that no material findings have been excluded
from the conclusions presented," says Biörn Riese at Mannheimer

Following the completion of the investigation, Casper von Koskull,
President and CEO of Nordea, comments:

"Group Compliance and Group Operational Risk have done a very robust
investigation where approx. 60 persons have spent more than 30,000
hours going through more than 10,000 documents to get all facts on
the table.

The investigation shows that Nordea in Luxembourg at an early stage
introduced new, stricter policies and standards regarding tax
compliance in 2009, long before this was market practice or required
by law. This was complemented by training programmes and hiring of
tax competence.

However, I'm disappointed that the investigation shows that the
implementation was insufficient. That is not acceptable. The
deficiencies are, to a large extent, of a governance and control
nature. Even so I'm comforted by the conclusion that no evidence has
been found that Nordea employees have proactively contributed to tax

I want to be absolutely clear. We do not accept Nordea being used as a
platform for tax evasion or aggressive tax planning. Nordea is the
largest bank in the Nordic region and has a special obligation to be
a good corporate citizen. Taxes are mandatory, and tax compliance by
corporates and individuals is critical for society at large. We
recognise that following the letter of the law only is not enough. We
must adapt to our stakeholders' expectations and the norms society
has today to earn our customers' trust.

I have initiated a number of initatives to address this:

· The Business Ethics and Values Committee is an operational
function that will proactively work to develop key policies and
strategies and ensure that they are in tune with our Nordic values as
well as our stakeholders' demands and views on what a responsible
bank must adhere to.

· Policies will be changed in order to minimise the room for
individual interpretation. We must have a common view on compliance
and a consistent implementation of our policies throughout the Nordea

· The established Tax Board on group level will make the call on
complex issues and ensure consistent decisions on these matters.

With these initiatives and the measures below I'm confident that we
have mitigated the identified deficiencies. Compliance is by nature
never done. We will now continue our investigation as part of the
continuous operational risk and compliance work, and we will continue
to invest in and strengthen our compliance functions."

Summary of measures taken by Nordea to address the findings of the

· Nordea will apply stricter governance of Nordea Bank S.A. in
Luxembourg (NBSA) and integrate NBSA into the Nordic organisation
while also respecting the legal and governance responsibility of the
board and management of NBSA. The decision to integrate NBSA into the
Private Banking organisation is to ensure a consistent implementation
of policies and secure a fully compliant culture. NBSA will have a
new board composition also including an external board member and
internal control functions will be strengthened. A strategy and risk
review of NBSA will also be conducted in respect of the jurisdictions
where our customers are present and considering, among other things,
relevant Nordic business relations criteria. The likely outcome will
be a more limited scope going forward.

· NBSA has taken immediate action and blocked the accounts where
suspicious indications were found. This goes for the 68 cases
highlighted by Group Compliance. We are in accordance with our
policies investigating these accounts further to obtain reasonable
comfort that customers comply with relevant rules for declaration and
taxation. Otherwise their accounts will be closed. Even if an account
will be closed NBSA will still fulfil its reporting obligations under
the OECD's Common Reporting Standard (CRS).

· Nordic Private Banking customers will also be handled without
delay to verify that documentation is complete.

· Nordea will strengthen its tax policy on customer advice for the
Nordea Group.

· NBSA will immediately ensure that the required KYC data are

· Nordea will say no to all new company structures where the
business purpose is not clear.

· NBSA will enforce new, stricter criteria for existing and new
customers having offshore struc...

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