DNB has implemented several important measures after the so-called Panama Papers case. The purpose is, among other things, to strengthen the Group’s management of subsidiaries and to improve its quality assurance of new products.
Panama Papers showed that DNB’s subsidiary in Luxembourg helped around 40 customers establish companies in the Seychelles in the years between 2006 and 2010.
As the daily newspaper Aftenposten pointed out in its coverage of the matter, no violations of the law were uncovered on the part of DNB.
DNB acknowledged that the bank should not have helped establish these companies for Norwegian taxpayers, as these structures could be used for tax evasion.
DNB’s Board of Directors arranged for an external investigation into the matter, which also concluded that DNB had not violated the law. According to the report, the service offered to the 40 customers by the bank's Luxembourg office should not have been established, and should have been terminated earlier.
The Board initiated five principal measures to learn from the case and the findings in the report.
The measures shall ensure that the bank's operations are in line with regulations and the expectations of its shareholders, customers, and society at large.
Changes in Luxembourg
The operations in Luxembourg have been more closely integrated with the rest of the Group through changes in reporting lines, governance procedures and an expansion of the Board.
“We have strengthened the risk and compliance function in Luxembourg with two full-time positions since the third quarter of 2016. There is generally a much closer dialogue between Norway and Luxembourg in a number of areas," explains Eirill Holtvedt, head of the Strategy and Finance Division in Wealth Management.
New category department
In the Private Banking segment, a new category department has been established.
It has been given responsibility for quality assurance of all products and services offered to the segment’s customers in Norway and in DNB Luxembourg, and reports to the head of the Private Banking Division.
Review of the customer base
DNB has carried out a review of the customer base in Luxembourg to ensure that DNB has up-to-date information about customers and operates in line with prevailing regulations.
“This is an ongoing process, as new regulations are constantly introduced, while customers keep changing their structures,” explains Holtvedt.
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Training of employees
All employees in Luxembourg have attended courses reviewing DNB’s values, customer value proposition and brand policy.
Several have also participated in leadership development initiatives, seminars and training along with employees with similar functions in other parts of DNB. A key element in the measures has been to raise the understanding of DNB’s values and role in Norwegian society
All employees have also been through a training programme to acquire a basic knowledge of anti-money laundering, terrorist financing and international sanctions.
New group guidelines
In December 2016, DNB‘s group management adopted new group guidelines for subsidiaries.
This includes revised standard instructions for Boards of Directors of major subsidiaries, revised instructions for chief executives of major subsidiaries, criteria for the composition of the Boards of Directors of major subsidiaries, and a structure for the training of board members in major subsidiaries.
In addition, it was decided to strengthen business reporting from the subsidiaries to the group chief executive and the Group’s Boards of Directors.
New governance tool
In June 2016, the Board of Directors decided to implement a tool for comprehensive governance, risk and compliance in the Group.
This is a dynamic tool which will be available to all DNB employees once it has been fully implemented.
“Work on this is in progress. The first implementation is scheduled for November. We assume that the next two modules will be ready for use in approximately 18 months. Thereafter, it may still be relevant to implement additional modules,” says Jacob Laading, head of the Integrated Risk Management Division.
With respect to the risk management functions for international subsidiaries, direct reporting lines were introduced between local operational risk officers (LOROs) and Group Risk Management in the autumn of 2016.
In addition, a requirement for annual meetings between local management and Group Risk Management was introduced.
New product and service guidelines
New group guidelines for the approval of new products and services, the so-called "shelf control", have been approved and taken into use.
The purpose is to further ensure that DNB’s products and services fulfil the requirements and expectations which must be met by the Group as a large Norwegian financial institution.
According to the “shelf control”, the final decision to establish, change or phase out a product or service shall be made by the group executive vice president who is responsible for the customer segment, e.g. personal customers or Private Banking customers.
“In addition, there is a focus on the accountability of individuals, and on monitoring of risk through the product’s lifecycle,” adds Laading.
He explains that it has been a main goal to show that maximum light is shed on relevant risks through this process.
“Under the new system, monitoring and approval will be system-controlled and thus more robust and accurate,” explains Laading.
“No systems or procedures can eliminate errors or prevent individuals from doing things that are not in line with the guidelines. However, we can make sure we have systems that help us reduce the risk of errors and omissions, and this is what we are constantly seeking to get better at," he says.
Risk-based transfer of existing products and services to fulfil the requirements in the new procedure is expected to be completed in 2018.
Introduction of an external whistleblowing channel in DNB in addition to the existing notification channel
DNB has established an external whistleblowing channel to complement the existing notification channel.
The channel will be available as soon as the final clarifications have been made with Finanstilsynet (the Financial Supervisory Authority of Norway).