Predicate Offences

168. Denmark has adopted an all crimes approach by making its ML statute applicable in the case of any punishable violation of law.

169. There are no limitations on the term “punishable violation of law.” Profits from any violation, whether that be a violation of a Criminal Code provision or a violation of a provision in other legislation that sets forth a punishment however minor, come within the ambit of section 290(1). Denmark has offences (set forth in the Criminal Code and other acts) that relate to each of the designated categories of offences, and accordingly they may serve as predicate offences to the ML offence. For most of the offences, there is a range of offences:

Participation in an organized criminal group and racketeering: See “Question 6” below. Racketeering is covered by Sections 285-287, cf. Section 281, of the Criminal Code.

Terrorism, including terrorist financing: Sections 114-114 e of the Criminal Code.

Trafficking in human beings and migrant smuggling: Trafficking in human beings is covered by Section 262 a of the Criminal Code. Migrant smuggling is covered by Section 59 (7) of the Act no. 826 of 24 August 2005 (consolidation) on Aliens; under particularly aggravating circumstances, for the purpose of profits, by Section 125a of the Criminal Code.

Sexual exploitation, including sexual exploitation of children: Chapter 24 of the Criminal Code.

Illicit trafficking in narcotic drugs and psychotropic substances: Order of 31 August 1993 on Euphorant Substances (as amended); under particularly aggravating circumstances, Section 191 of the Criminal Code.

Illicit arms trafficking: Act no. 918 of 10 September 2004 (consolidation (as amended)) on Weapons and Explosives; for weapons and explosives that are particularly dangerous and capable of causing serious damage, illicit arms trafficking is covered by Section 192a of the Criminal Code.

Illicit trafficking in stolen and other goods: Section 290 of the Criminal Code.

Corruption and bribery: Active bribery, Section 122 of the Criminal Code, passive bribery, Section 144 and bribery in private affairs by Section 299, no. 2; bribery in arbitration, Section 304a of the Criminal Code.

Fraud: Sections 285-287, cf. Section 279 of the Criminal Code, and cf. Section 279 for computer fraud.

Counterfeiting currency: Chapter 18 of the Criminal Code.

Counterfeiting and piracy of products: Cultural products, Act no. 725 of 7 June 2005 (consolidation (as amended)) on Copyrights; under particularly aggravating circumstances by Section 299 b of the Criminal Code. Non-cultural products, Act no. 1136 of 16 November 2004 (consolidation (as amended)) on Patents, Act no. 782 of 30 August 2001 (consolidation (as amended)) on Trade Marks, Act no. 1259 of 20 December 2000 (as amended) on Designs, Act no. 367 of 9 June 1998 (consolidation (as amended)) on Utility Models and Act no. 778 of 9 December 1987 (as amended) on the Rights on Topographies of a Semi-conductor Product.

Environmental crime: Several (about 200) laws and orders on environmental issues. Under aggravating circumstances by Section 196 of the Criminal Code.

Murder, grievous bodily injury: Murder Section 237 and grievous bodily injury by Sections 245 and 246 of the Criminal Code.

Kidnapping, illegal restraint and hostage-taking: Section 261 of the Criminal Code.

Robbery or theft: Robbery (Section 288 of the criminal Code); theft (Sections 285-287, cf. Section 276 of the Criminal Code).

Smuggling: Act no. 867 of 13 September 2005 (consolidation) on Customs; under particularly aggravating circumstances, Section 289 a of the Criminal Code.

Extortion: Sections 285-287, cf. Section 281, of the Criminal Code.

Forgery: Sections 172, cf. Section 171, of the Criminal Code.

Piracy: Section 183 a of the Criminal Code and references in Counterfeiting and piracy of products.

Insider trading and market manipulation: Act no. 843 of 7 September 2005 (consolidation (as amended)) on Securities Trading etc.

Extraterritorial predicate offences

170. Neither Section 290 nor other provisions in the Danish Criminal Code address explicitly extraterritorial application. However, ML offences are punishable even if the predicate offence has taken place in another jurisdiction if the underlying conduct also constitutes a criminal offence in Denmark. This is because for Denmark to assert criminal jurisdiction over a course of conduct not all, just an individual part, of the conduct will have had to occur in Denmark (for instance the laundering activity). In addition, under section 7(1)(no.2) of the Criminal Code, in the case of Danish citizens there is jurisdiction based upon nationality even when no part of the offence occurred in Denmark. Denmark has successfully prosecuted ML where the predicate offence was committed in another jurisdiction.

Self-laundering

171. Though comprehensive in many other respects, Denmark’s ML offence does not apply to persons who commit the predicate offence. Self-laundering is not an offence that is separate from the predicate crime. Rather it is viewed as part of the predicate offence activity.

172. Danish authorities indicate that self-laundering is not covered because of a fundamental principle in the Danish legal system that no one can be convicted of two different crimes concerning the same assets. It is an underlying precondition of the criminal law system that a person cannot be punished for the receiving of stolen goods (Section 290) and at the same time be held criminally liable as the principal perpetrator of the predicate crime or for complicity in relation to the predicate crime.

173. The Danish authorities provided support for this in criminal law texts dating from 1841 that comment on the fact that in the Danish system a person would not be found guilty for two independent crimes relating to receiving stolen goods and the primary criminal conduct relating to such property. Texts commenting on this in particular, or on a more general concept regarding the commission of crimes typically committed in ways that contain the violation of additional provisions, were provided dating from 1841, 1895, 1905, 1952, 1993, 2004 and 2005. In a 2005 text written by a former Supreme Court judge and Chief Prosecutor and two professors of criminal law, the authors conclude that the Criminal Code is built on the precondition that a person who is punished for receiving stolen goods cannot be punished for complicity in the primary crime. In addition, a Supreme Court case from 1893 was explicit in rejecting the city court’s finding that a person could be guilty of receiving stolen goods in addition to theft.

174. Authorities indicated that the commission that considered the revision of the ML offence that resulted in the current Section 290, in its deliberative meetings, gave no more than very cursory consideration of the issue, because it was recognized as not consistent with the Danish approach to criminalization. Denmark’s actions in not giving consideration to the issue as it amended the Danish law, or taking any steps towards enacting a provision although the Vienna and Palermo conventions mandate it unless otherwise required by fundamental principles of domestic law, indicate the fundamental nature of the issue in the Danish system as articulated also in the Danish legal texts.

175. As the Report of the Ad Hoc Committee on the Elaboration of the Convention against Transnational Organized Crime and attached Interpretative Notes for the official records (A/55/383/Add.1) make clear, Article 6(2)(e) of the Palermo Convention was meant to take into account “legal principles of several States where prosecution or punishment of the same person for both the predicate offence and the money-laundering offence is not permitted.” It is the case with Denmark that there is a long tradition based upon principles fundamental to its system that prosecution and punishment for both the predicate and ML offences are not permitted.

176. While the evaluation team concluded that Denmark is in compliance with FATF Recommendation 1 in this regard, it was also of the view that Denmark might consider whether it could revisit this issue (as have a number of European countries in broader ways) at least in a narrow set of circumstances. It appears that the fundamental principle is directed primarily at not criminalizing twice what is, as a long standing matter, considered a single course of conduct, the unlawful taking and then the initial placement of the proceeds of unlawful activity. With the increasing sophistication of ML techniques and methods used by organized criminals to hide proceeds, once the initial placement occurs, there are often subsequent actions that become more and more disconnected with predicate offender’s initial criminal conduct that produced the proceeds. Beyond initial placement (viewed in the Danish legal system as part of the original conduct), it could be that it would not be inconsistent with fundamental principle, viewed in light of new kinds of criminal conduct, for the continued actions in converting and reconverting, sending away and hiding, particularly when such actions are distant in time and place from the initial fraud, theft, etc. to be considered separate criminal activity.

177. Danish authorities indicate that the perpetrator of a crime who launders his or her proceeds will be charged with the predicate crime. However, if there is not enough evidence to convict on the predicate crime, the person can be charged with and convicted of ML.⁵

Definition of Property

178. The term profits is interpreted broadly and covers any type of property that directly or indirectly represent the proceeds of crime. Danish authorities indicate that the explanatory report relating to section 290 supports this, and “profits” cover every type of property (including for instance both objects and money), as long as it is identified as proceeds. It may be direct profits, surrogate or indirect profits or the income from such assets. A share in the profits includes some or all of the profits.

Establishing Property as Proceeds

179. For a ML conviction, there must only be sufficient indications that property is proceeds (or alternatively that a person thought that property was proceeds even if it was not). There need not be a conviction on a predicate offence, nor an indication who committed it. The explanatory report on Section 290 notes that decisive in the application of the provision, as with the previous section (section 284 of the Criminal Code), is a showing that proceeds stem from a predicate offense as opposed to from legal activities. Case law establishes that establishing that proceeds are from crime rather than from legal activity can occur by presumption.

Ancillary offences

180. Danish law provides for a number of ancillary offences that are applicable in the case of all crimes including ML and FT:

Attempts: Section 21(1) of the Criminal Code addresses an attempt to commit an offence and applies to Section 290 offences. Acts that aim at the promotion or accomplishment of an offence punishable by four months or more are punishable as attempts when the offence is not completed. Even remote acts of preparation for a crime are included in the concept of an attempt, as long as a specific intent to consummate the crime can be proved. The penalty for an attempt is the same as for the offence, but under section 21(2) of the Criminal Code it may be reduced particularly if there is little strength or persistence in the criminal intention. Danish authorities have successfully used the attempt provision in ML offence prosecutions.

Complicity: Section 23(1) of the Criminal Code criminalizes complicit actions of all kinds including aiding and abetting as well as facilitating and counseling the commission of an offence. Under the section, the penalty for an offence applies to a person “who has contributed to the execution of the wrongful act by instigation, advice or action.” A person is held responsible regardless of whether s/he will have or expects a share of proceeds or other benefits from the criminal conduct. Attempts to contribute to an offence may also be punished. Punishment may be reduced (from that set forth for the offence for which there was complicity) if a person only intended to give assistance of minor importance, or to strengthen an intention that already existed and if the offence was not completed or the intended assistance failed.

181. Danish authorities indicated that provisions in Danish law on attempt and complicity have a very broad scope in comparison with similar provisions in other penal systems. For instance, under Danish law, a person is subject to a criminal liability regardless of whether the principal of the crime can be identified. Also a person’s participation in an organized criminal group’s criminal activity is punishable directly as a violation of the substantive criminal provision, and as necessary may also be supplemented with use of the provision on complicity.

182. A person’s participation in a conspiracy to launder proceeds would be punished as an attempt to launder under section 21 or as complicity in laundering under section 23 of the Criminal Code. A person who agrees with one or more other persons to commit a crime can be punished for an attempt to commit the criminal act although the crime is not committed. Under Danish law on attempts, even remote acts of preparation are covered. If not all participants to an agreement are to take an active part in the commission of the crime, the Danish provision on complicity can be used. Danish law does not require there be any special action taken to implement the agreement nor need an organized criminal group take part for there to be criminal liability. Danish authorities noted that conspiracy is not contrary to the fundamental principles of Danish law but it has not been necessary to enact a specific provision criminalizing conspiracy given the reach, based upon previous cases and practice, of other ancillary offences.

183. Under the traditional concept of conspiracy, if two or more persons agree to commit an unlawful act and take a step towards it, they are liable. In the Danish system, the fact that two or more persons have agreed to commit an unlawful act leads to criminal liability in the same manner as it would for one to have been a participant in an agreement and for there to have been some action taken to further the agreement. In these circumstances, the same conduct is covered and a specific conspiracy offence is not required.

184. Since the same conduct is criminalized but in a different manner, Danish authorities are also able to provide assistance in mutual legal assistance settings when the offence is conspiracy. The underlying conduct is subsumed under Danish law and if the conduct is meets dual criminality requirements (when required), assistance is provided. In a recent case, Danish authorities provided assistance in transferring a sentence where the conviction was for conspiracy to defraud. The offence was equivalent to complicity to engage in fraud under section 279, cf. section 23 of the Danish Criminal Code.

185. In some instances, early stage conduct is also addressed through direct criminalization of the such conduct. (See, e.g., financing of terrorism crimes set forth in sections 114a and 114b of the Criminal Code.)

The mental element

186. The ML offence applies to natural persons that knowingly engage in ML. Section 19 of the Danish Criminal Code provides that violations of the Criminal Code must be committed intentionally to be punishable unless there is express provision otherwise. This intent may be direct intention, advertent negligence (probability intent) or malice (dolus eventualis).

187. The expert report for Denmark’s draft Criminal Code 1930 included a definition of intention. “Intention exists when the actor knows that his act will lead to the fulfillment of the requirements of the law for the offence (actus reus), or when he sees the occurrence of the offence as necessary or predominantly probable consequence of the act, or finally when he only sees the occurrence of the offence as possible but would have acted even if he had seen it as certain.” Although these concepts are not incorporated explicitly into the Criminal Code, authorities indicate it summarizes what is required under Danish law for criminal intention. This includes the traditional concept of “knowingly” that an actor is aware of the nature of his conduct and that it could reasonably cause the result.

188. In addition, intent may be inferred from objective factual circumstances. This is based upon the basic rule of freedom to consider the evidence, that is the principle of “conviction in time” (free moral judgment).

Liability of Legal Persons for ML Offences

189. Under Danish law, legal persons may be held criminally liable for having engaged in a violation of the Criminal Code including a violation of section 290. Under section 306 of the Criminal Code, companies, etc. (legal persons) may be held criminally liable for violations of section 290 in accordance with general supplementary provisions on the criminal responsibility of legal persons (sections 25-27, Criminal Code). Taken together, these provisions (sections 306, 290 and 25-27) provide for the criminal liability of a legal person if it can be shown that one or more natural persons in the company (or other legal person) intentionally committed ML. A specific natural person need not be identified, nor is there a requirement of a prior conviction of a natural person. In addition, the fact that a legal person bears responsibility does not preclude the natural person’s individual responsibility.

190. Legal persons include but are not limited to public companies, private companies, limited liability cooperatives, partnerships, associations, foundations, estates, municipalities and state authorities, and in some circumstances one person businesses. Punishment of a legal person is by fine. Criminal liability of legal persons does not preclude other liability as for instance the withdrawal of a license or other civil or administrative liability.

Sanctions

191. Denmark provides a penalty for natural persons convicted of a violation of its ML provision (the receiving offences set forth section 290(1) of the Criminal Code) of a fine or imprisonment for a term not exceeding one year and six months. Under section 290(2), if the receiving of stolen goods is of a particularly aggravated nature – this may be for instance because of the commercial character of the offence, or the amount of the gain obtained or intended, or because there were a large number of offences, the penalty is a fine or imprisonment for not exceeding six years. Under section 88(1) of the Danish Criminal Code, a person charged with several offences is liable only for the maximum for the most severe crime unless there are particularly aggravating circumstances, in which case the penalty may exceed the most severe penalty by a half. Accordingly, there may be circumstances when a person charged with aggravated money receiving is liable for up to nine years imprisonment.

192. The determination of whether to charge the offence as aggravated is within the discretion of the prosecutor who is guided by the nature and circumstances of the conduct and by past decisions. The kind of conduct that is “of a particularly aggravated nature” is not defined in section 290, as it is a general concept under Danish criminal law, although several circumstances that indicate aggravation (commercial character of the offence, the amount of gain obtained or intended to be obtained, large number of offences) are set forth. In the case of ML in determining whether conduct is aggravated, Danish authorities noted that prosecutors would consider matters such as the amounts involved, the number of violations, whether there were several persons participating, whether the criminal activity assumed a commercial nature and the degree of secretiveness and concealment. The approach to the receiving offense of providing for penalty levels based upon the level of seriousness of the conduct, and operating within a single offence with different levels of punishment is a general approach under Danish criminal law and applies also in the case of many other offences. As it applies to ML, only in minor very simple cases can the offender stay within Section 290(1) (the basic offence). Violations of section 303 (gross negligence in receiving proceeds) are subject to a fine or to imprisonment for any term not exceeding six months.

193. Under Section 50(2) of the Criminal Code, a fine can be imposed as a supplementary punishment to other forms of penalty in addition to imprisonment when the defendant obtained, or intended to obtain, gain either for himself or others through the offence. In the case of a fine that is not a supplementary punishment to other forms of penalty, the fine may range from one day fines to 60 day fines of indefinite amounts. The principle of the day fine system is that the number of the day fines imposed should reflect the seriousness of the offence. The amount of each day’s fine is based upon the defendant’s economic situation including for instance his/her daily earnings, capital resources and family responsibilities. Under section 51(1) of the Criminal Code, if there has been considerable economic gain from the offence, the court may impose a fine other than a day fine.

194. For legal persons, the applicable penalty is a fine (section 25(1) of the Criminal Code) and there is no defined maximum. The imposition of fines on legal persons is governed in principle by the same rules as apply in the case of natural persons. The nature of the offence, the capacity to pay and the obtained or intended gain or amount saved are all considered. (Section 51(3) Criminal Code.)

195. Under the statutory scheme, ML conduct is punishable by a maximum of six years which, although this is within a lower range when compared with many other countries, is comparable to the maximum in a number of countries in the region, consistent with minimum EU standards, and consistent with the Danish approach to penalties for other criminal conduct. However, as noted below, the penalties that have been imposed for ML offences have been low. In the case of negligent ML, there is a very low sanction (up to six months) which would appear to apply even when large amounts of proceeds are involved. There is a limitation to 18 months maximum in the case of basic receiving (section 290) which authorities indicate applies only in small receiving cases. This is consistent with like 18 month maximums for the basic offense for a wide range of other offenses under the Danish Criminal Code including fraud, theft, embezzlement, fraud and extortion. Although it may affect the balance with other criminal provisions, one approach to improving the level of sanction actually imposed would be to increase this maximum.

Statistics

196. Since at least 2000, Denmark has maintained annual statistics on the number of investigations concluded and prosecutions and convictions occurring under section 290 and predecessor offences (sections 284 and 191a).

197. Danish authorities report the following statistics for concluded investigations of Section 290 of the Criminal Code and predecessor section offences:

Concluded Investigations by Year: Section 290 and Predecessor Sections

^*Section 290 Criminal Code for July 2001 and later; Sections 284 and 191a Criminal Code prior to July 2001.

Concluded Investigations by Year: Section 290 and Predecessor Sections

Year			2000	2001	2002	2003	2004	2005
Total ML* Investigations concluded in the year (convictions, acquittals, other dispositions)			1803	1957	1841	1932	1874	1865
Total Number of Convictions			1311	1403	1267	1266	1196	1199
	Convictions resulting in unsuspended imprisonment		251	238	258	244	199	240
	Convictions resulting in suspended imprisonment		419	482	440	439	423	410
	Convictions resulting in fines		641	683	569	583	574	549
Acquittals			58	66	81	58	65	38
Withdrawal of charges			55	73	76	76	84	86
No charges			372	408	406	529	520	532
Other decisions (for instance, warning)			7	7	11	3	9	10

^*Section 290 Criminal Code for July 2001 and later; Sections 284 and 191a Criminal Code prior to July 2001.

View Table

Concluded Investigations by Year: Section 290 and Predecessor Sections

Year			2000	2001	2002	2003	2004	2005
Total ML* Investigations concluded in the year (convictions, acquittals, other dispositions)			1803	1957	1841	1932	1874	1865
Total Number of Convictions			1311	1403	1267	1266	1196	1199
	Convictions resulting in unsuspended imprisonment		251	238	258	244	199	240
	Convictions resulting in suspended imprisonment		419	482	440	439	423	410
	Convictions resulting in fines		641	683	569	583	574	549
Acquittals			58	66	81	58	65	38
Withdrawal of charges			55	73	76	76	84	86
No charges			372	408	406	529	520	532
Other decisions (for instance, warning)			7	7	11	3	9	10

^*Section 290 Criminal Code for July 2001 and later; Sections 284 and 191a Criminal Code prior to July 2001.

Danish authorities report the following figures for the Section 303 offence (gross negligence offence):

Concluded Investigations by Year: Section 303 Criminal Code

Concluded Investigations by Year: Section 303 Criminal Code

Year		2000	2001	2002	2003	2004
Total Investigations concluded (convictions, acquittals, other dispositions): Section 303		122	98	124	97	97
Total Number of Convictions		89	80	107	78	77
Convictions resulting in unsuspended imprisonment		4	4	4	3	0
	Convictions resulting in suspended imprisonment	9	8	6	4	3
	Convictions resulting in fines	76	68	97	71	74
Acquittals		5	1	6	3	2
Withdrawal of charges		1	1	3	1	3
No charges		25	15	12	13	14
Other decisions		2	4	0	2	1

View Table

Concluded Investigations by Year: Section 303 Criminal Code

Year		2000	2001	2002	2003	2004
Total Investigations concluded (convictions, acquittals, other dispositions): Section 303		122	98	124	97	97
Total Number of Convictions		89	80	107	78	77
Convictions resulting in unsuspended imprisonment		4	4	4	3	0
	Convictions resulting in suspended imprisonment	9	8	6	4	3
	Convictions resulting in fines	76	68	97	71	74
Acquittals		5	1	6	3	2
Withdrawal of charges		1	1	3	1	3
No charges		25	15	12	13	14
Other decisions		2	4	0	2	1

198. As the table above relating to Section 290 cases makes clear, Denmark is regularly and actively using its ML provision and for a jurisdiction its size has instituted a significant numbers of prosecutions each year. However, authorities indicated that virtually all of the matters reflected in the first chart involved small scale section 290(1) offences (small scale receiving of stolen goods). Danish authorities have not maintained regular or firm statistics showing the number of prosecutions and convictions for aggravated conduct. On an anecdotal basis, they indicate they believe that in 2003, charges were instituted for aggravated laundering in 14 instances. These include charges (some of which have been concluded and others not) from two major drug trafficking investigations in which 11 persons were implicated, and three separate non-drug trafficking related matters each involving the purchase of stolen goods. In 2004, there were two new cases charged as aggravated receiving both drug-trafficking related. In addition, three receiving cases charged as aggravated conduct in drug trafficking cases remained from 2003. As no new charges for aggravated conduct under the ML provision were instituted in 2005, there were 16 cases in the 2003-2005 period.

199. These statistics of course do not provide the entire picture of the possible results from (and thus relevant to the general effectiveness of) Danish AML initiatives. The criminal ML offence may not be employed specifically to address the criminal conduct that constitutes laundering because of the Danish system of sanctioning the self-laundering as part of the predicate activity. Nonetheless, the AML system as a whole may be causing the conduct to come to light through the reporting obligation, and may be deterring other conduct through the existence of both the reporting obligation and various sanctions.

200. While the self laundering conduct is addressed from a criminal perspective in the predicate offence context, there is no additional penalty for the conduct other than the consideration given to the ML conduct (the self launderers’ hiding and use of the proceeds) as a factor in increasing the sentence for the predicate offence. Even considering that some ML conduct may be addressed in predicate offence prosecutions, the number of cases that Danish authorities have undertaken for aggravated ML over the last three years (the only period for which anecdotal information was provided) is very limited (an average of approximately 5 a year). These have been for the most part associated with two major drug trafficking matters. Danish authorities suggest this is because in most economic crime matters, proceeds are sent abroad and Denmark is left with no perpetrators to prosecute, and because Section 290 cases may not be fully investigated or prosecuted where there are other more serious violations to pursue. This is because where the addition of a Section 290 charge would not increase the penalty, and prosecution for the 290 offence is not viewed as having a special preventive effect, authorities do not pursue such charges. However, it is worth noting that prosecution for the predicate offense is in some circumstances in the Danish context also a prosecution for the ML conduct through the predicate offence. Given this situation, serious ML conduct addressed through criminal prosecutions undertaken in Denmark may well be greater than that reflected in the anecdotal statistics on aggravated ML cases alone.

201. Although there may be a low level of financial or organized crime in Denmark relative to other jurisdictions, the very small number of Section 290(2) cases over an extended period suggests that Danish authorities should undertake a review of why this is the case looking in addition at the relatively small numbers of STRs, considering and attempting to document the ways in which ML conduct is addressed through other kinds of prosecutions, and at the same time make an effort to develop more cases that are sanctionable as aggravated conduct which authorities have indicated includes all but minor, simple cases.

202. Danish authorities have also maintained statistics on cases in which imprisonment for period of a year or more was imposed.

Imprisonment (One Year or More) for Section 284/290 Offences by Year

Imprisonment (One Year or More) for Section 284/290 Offences by Year

Section 284/290	2000	2001	2002	003	2004
Total Number of 284/290 cases in which imprisonment for one year or more was imposed.	9	21	17	13	9
1-2 years	7	17	15	12	5
2-3 years	2	2	2	0	3
3-5 years	0	0	0	1	1
5-8 years	0	1	0	0	0

View Table

Imprisonment (One Year or More) for Section 284/290 Offences by Year

Section 284/290	2000	2001	2002	003	2004
Total Number of 284/290 cases in which imprisonment for one year or more was imposed.	9	21	17	13	9
1-2 years	7	17	15	12	5
2-3 years	2	2	2	0	3
3-5 years	0	0	0	1	1
5-8 years	0	1	0	0	0

203. Although ML activity may be sanctioned with up to six years imprisonment, in only three instances in the last five years has a person been imprisoned for more than three years. The vast majority of all cases (aggravated and non-aggravated) result in no imprisonment at all. While the length of imprisonment and number of cases in which it is imposed is not the only indicator of the effectiveness of ML criminalization, it is one factor that provides an indication of how effectively in practice ML criminalization is working and its capacity for deterring like conduct. In Denmark, penalties imposed in cases of ML have been low.

204. Better statistics need to be maintained which differentiate section 290(1) and 290(2) cases and that note the full range of sanctions imposed, and served or collected, in each instance.

205. An important factor for Denmark in the ongoing process of evaluating its AML program is the nature of the criminal cases it institutes. As noted above, Danish authorities should consider why the number of aggravated ML cases is small and has decreased over the years. Authorities should consider on a regular basis the additional statistics they begin to gather, and how to develop additional ML cases that are more than simple receiving cases and greater use of the provision to address laundering of proceeds of crimes in addition to drug trafficking.

Greenland and Faroe Islands

206. The provisions in Greenland and the Faroe Islands and issues relating to their implementation were not considered by the evaluation team on an in-depth basis. In Greenland under Section 78 of the Criminal Code and Section 3(2) of the Controlled Drugs Act (as applicable in Greenland), ML is limited to predicate offenses involving offences against property and certain drug trafficking criminal activity. Under the Greenlandic Criminal Code there are diverse sanctions such as a caution, safe custody for an indeterminate period, and imprisonment (which may not exceed ten years) available in each instance, but the Code does not stipulate maximum and minimum penalties for specific kinds of crimes. In the Faroe Islands, under Section 191, 191a and 284 of the Criminal Code, the ML offense is limited to predicate crimes as drug trafficking, theft, robbery, misappropriation, embezzlement, fraud and certain other crimes. Under Section 286(3) of the Criminal Code, the penalty for receiving stolen goods under particularly aggravating circumstances is a maximum of 6 years.

207. While Greenland and the Faroe Islands have criminalized ML and many major predicate crimes are covered, they not yet adopted provisions similar to the revised section 290 adopted by Denmark in 2001, nor are they yet parties to the Vienna and Palermo Conventions. The ML provisions in force in these jurisdictions do not yet meet current international standards and work is underway to bring provisions into compliance with international standards.

Recommendations and comments

208. Use the criminal ML provision more effectively by developing and prosecuting a larger number of cases involving serious ML.

209. Seek to increase the penalties actually imposed for violations of the ML provision.

210. Increase the maximum penalty available for the negligent money laundering offence.

211. Make the provisions that criminalize money laundering in Greenland and the Faroe Islands fully consistent with the requirements of Article 3 of the Vienna Convention and Article 6 of the Palermo Convention, and use one of the approaches to predicate offenses set forth in the FATF Recommendations.

212. Consider the extent to which Denmark may be able to criminalize self-laundering separately, recognizing that while not a FATF R. 1 requirement where contrary to the general principles of penal law, countries with similar legal systems have progressively moved towards providing for self-laundering as a separate offence that can be charged with a predicate offence.

213. Keep more comprehensive statistics on ML cases including the kinds of cases (Section 290(1) or 290(2)) and predicate offences, and evaluate the reasons for the limited numbers of prosecutions under Section 290(2)

Compliance with FATF Recommendations

	Rating	Summary of factors underlying rating
R.1	LC	ML provisions in Greenland and the Faroe Islands are not fully consistent with international standards as reflected in the Vienna and Palermo Conventions and FATF Recommendation 1 in that, for instance, the range of predicate offenses is not adequate. Denmark institutes very limited numbers of prosecutions under its aggravated ML provision.
R.2	LC	Penalties imposed for ML offence are low. Denmark institutes very limited numbers of prosecutions under its aggravated ML provision.

View Table

	Rating	Summary of factors underlying rating
R.1	LC	ML provisions in Greenland and the Faroe Islands are not fully consistent with international standards as reflected in the Vienna and Palermo Conventions and FATF Recommendation 1 in that, for instance, the range of predicate offenses is not adequate. Denmark institutes very limited numbers of prosecutions under its aggravated ML provision.
R.2	LC	Penalties imposed for ML offence are low. Denmark institutes very limited numbers of prosecutions under its aggravated ML provision.

Greenland and Faroe Islands

229. However, neither Greenland nor the Faroe Islands have provisions similar to Sections 114-114e of the Danish Criminal Code nor has the Terrorist Financing Convention been extended to them. Greenland’s current criminal code contains provisions that address acts committed with a terrorist purpose. Ancillary provisions that cover attempt and complicity are also set forth in the Greenlandic Criminal Code at Sections 8 and 9, and have the same broad scope as provisions in the Danish Criminal Code. This enables a narrow coverage for financing of terrorism acts through ancillary provisions (specifically complicity to a concrete terrorist act with a showing that the defendant has intent to commit the act), an approach as noted above that is not consistent with FATF SR II. The Commission on Greenland’s Judicial System issued a report in 2004 that proposed, relevant to UNSCR 1373 implementation, adoption of the Danish Criminal Code provisions on terrorism and financing of terrorism, as well as other provisions that would assist in implementation of UNSCR 1373 such as the AJA provisions on seizure and the Danish Criminal Code provision 77a. Greenland Home Rule and others are commenting on the report and delays have occurred because of political changes in the Home Rule Government. Once comments are received, the proposed revisions will be reviewed by the Danish MOJ to ensure they facilitate Greenland’s full compliance with UNSCR 1373.

230. In the Faroe Islands terrorist financing would be approached through complicity and attempt provisions (Section 21 and 23 of the Criminal Code) relating to underlying offences as homicide, arson, deprivation of liberty, hijacking, etc. As with Greenland, there is some coverage for financing of terrorism acts through complicity in the commission of a concrete terrorist act. However, the criminalization of terrorist financing solely on the basis of aiding and abetting, attempt, complicity, etc. does not comply with SRII.

231. The Danish government is working to ensure the full implementation of relevant conventions and UN Resolutions in the Home Rule legislation of Greenland and the Faroe Islands. There have been ongoing discussions between the Danish MOJ and representatives of the Faroe Home Rule to ensure full compliance with UNSCR 1373 in connection with discussions on possible transfer of responsibility for police and administration of justice affairs to the Faroe Home Rule, and more recently outside the framework of those discussions.

Recommendation 32 (terrorist financing investigation/prosecution data)

232. Danish authorities reported that there have been no convictions for terrorist financing. There are two cases in which charges have been instituted each involving the collection or solicitation of funds. In one case, a non-profit organization and two persons are charged; in the other one person has been charged. In one additional case, there was an investigation of a non-profit organization but the case was closed after a conclusion that no violation had occurred. The Steering Committee of the Financing of Terrorism (which consists of SØK and the Danish Security Intelligence Service) maintains statistics on investigations and prosecutions that are commenced based upon STRs or from other sources. In addition, the National Commissioner of the Police keeps statistics on the number of matters that arise by criminal provision.

Effectiveness

233. Danish authorities are clearly ready to – and have - pursued financing of terrorism investigations and prosecutions. The effectiveness of Denmark’s terrorist financing offences, however, cannot be fully measured because cases have not yet been considered by the courts. There are now two cases in which violations are charged involving, in total, three individuals and one organization. One of the cases is expected to be heard in the court system shortly. The offences also carry substantial penalties and this could have the effect of deterring illegal financing activities. Danish authorities did not provide a specific threat assessment with respect to terrorism/terrorist financing operations other than a general statement that there is some risk but independent press reports indicate some such activity may be occurring in Denmark. This is consistent with its activities in investigating and prosecuting FT activity.

Third parties

244. Denmark provides for confiscation of criminal assets that are transferred to third parties. First, the general rule is that confiscation applies not only the an offender but also to persons to whom proceeds have been directly transferred (section 76(1) Criminal Code). Secondly, if the perpetrator (or the person to whom the proceeds have been directly transferred) transfers the proceeds to a third party, the proceeds may be confiscated (1) if the third party knew of the illicit origin of the assets or exercised gross negligence in this respect, or (2) if the transfer was at no cost. (Section 76(4) Criminal Code).

245. In the case of extended confiscation under section 76a, for assets from criminal activity that is not an offence of conviction, assets in the hands of a limited range of third parties with a special connection to the perpetrator are subject to confiscation. Specifically assets may be confiscated from two categories of third parties to whom illicit gains may have been transferred: first, the offender’s spouse or cohabitant unless the marriage or cohabitation did not exist at the time of the acquisition or the property was acquired more than five years before the commission of the offence; secondly from a corporation in which the offender has a substantial interest unless the transfer occurred more than five years before the commission of the crime. Case law also supports treating assets as belonging to a perpetrator if it is reasonably clear the assets are available to him/her. For instance, one court in Denmark found a defendant was the real owner of an enterprise that was registered in his wife’s name. In another, the High Court ordered confiscation of funds that had been transferred to overseas companies owned by a mother of one of defendants in an investment fraud case. The court found in reality the funds were not outside the perpetrators’ control.

246. Legal remedies are available to protect third parties rights. Under section 807c of the AJA, the courts can at any stage of the case make a decision concerning the rights of any person including third parties. The request is brought before the court and the decision of the court is in the form of an order after all those with an interest in seized property have an opportunity to be heard. Typically third parties will contact the prosecutor who will either seek to lift a seizure of property or otherwise have the matter heard by the court.

Seizure

247. Seizure can take place to secure both a property-based confiscation order and value orders. The concept of seizure within Danish law includes both a restraint where the property remains in another’s possession, and seizure where the property is held by the authorities.

248. Sections 801-806 of the AJA set forth the rules on seizure. A seizure may take place to secure a claim for confiscation. (Section 801(2)). In addition, seizures may secure evidence, the State’s claim for costs and fines, and a victim claim for compensation. (Section 801(2)). It may also take place when a defendant has been charged and is evading further prosecution in a case.

249. Any objects or goods owned by the suspect may be seized to secure a confiscation order. For an order for seizure (to secure a confiscation order) to issue, a person must be reasonably suspected of an offence that can be prosecuted under Danish law and the seizure must be considered necessary to secure the claim for confiscation. Danish authorities indicated the necessity of seizure to secure the claim means that prosecutors must ensure that they do not seek a coercive measure when less intrusive means would suffice. Authorities indicated it is not a necessity to show risk of dissipation.

250. If charges have been filed involving an offence that could result in imprisonment for 18 months or more, and an accused is evading prosecution, all a suspect’s property including subsequently acquired property may be seized. (Section 802(3) AJA). Proportionality would apply.

251. Denmark’s laws also make provision for the seizure of objects and assets in third party hands to secure a confiscation order. Objects are subject to seizure in the course of an investigation if can reasonably be presumed that the they should be confiscated or forfeited. Value confiscation can also be secured through assets in third party hands. Under section 803(2), assets such as money may be seized under the same standard: if it can be reasonably presumed that such assets may be confiscated or forfeited.

252. Generally, a decision on seizure is made by the court (section 806(2) AJA) but the police may also carry out a preliminary seizure if awaiting a court order will defeat the purpose of the measure. In such a circumstance, the police must either obtain consent or bring the matter before a court within 24 hours at the request of the affected person. Section 806(3)). A seizure must be proportional. If less invasive measures would be effective, they must be used. (See section 805). Seizure orders may issue without prior notice. Section 748(1) of the AJA provides that suspects need not be informed of court hearings for orders relating to discovery, search and seizure or other preliminary matters (matters arising under Chapters 69-74 of the AJA). As a matter of practice, notice is not normally provided, with authorities providing such information only in circumstances when it would not adversely affect the seizure. The court or police may bind a person not a suspect to secrecy regarding a seizure, production or questioning if necessary in a criminal investigation. (Sections 189, 803 (1) and 804 (2) AJA.)

253. A Circular addresses the management of seized proceeds. Cash in amounts that exceed DKK 2,000 (EUR 268) and securities must be deposited in a bank or other financial institution. In the case of immovable property, seizures are to be registered in official title registries to prevent owners from selling or otherwise disposing of the property.

Searches

254. Searches (of dwellings, other premises or objects that a suspect possesses) for seizable property may occur only if the person is reasonably suspected of an offence indictable in Denmark and the search is of significant importance to the investigation. The same kind of searches where the person is not a suspect may take place upon consent or if there is an investigation of an offence for which imprisonment can result and there are specific reasons to presume objects which can be seized can be found by the search. A decision to search in the case of a suspect is made by the police; decisions with respect to others are made by the court except in exigent circumstances. (Section 796 (1) and (2) AJA).

255. A court may permit the police, with a single warrant, to carry out several individual searches without immediate notification (repeated secret searches) within a period not exceeding four weeks. This may be necessary where, for example, no drugs or weapons were found at the first search, but where it is still suspected that delivery on the location in question will take place within a short time, or where a search had to be interrupted owing to the risk of discovery of the investigation.

Freezing/restraint

256. Danish authorities indicated that as a matter of practice, law enforcement authorities always seek to either restrain or seize criminal proceeds as soon as proceeds or substitute assets are located. Restraints are included under the concept of seizure under Danish law (see AJA Sections 801 et. seq.) and when a seizure takes place, the authorities may either take possession of the property or leave it restrained in another’s hands.

Production Orders and Tracing Mechanisms

257. In the early states of a criminal investigation, Danish law enforcement authorities routinely investigate the proceeds and benefits from criminal activity. Police and prosecutors are provided with investigative powers that permit identification and tracing of assets, including powers to order production of documents, to search and seize, and as needed in cases of aggravated ML or FT to use various special investigative techniques. They have ready access to various sources of domestic information including information held by tax and customs authorities, and can access public databases as companies registers, real estate registers, and vehicle register.

258. Production of documents (for instance financial records) by third parties is provided for through section 804 of the AJA. As long as an item can serve as evidence or may be confiscated, an order may issue. Danish authorities indicated that serving as evidence includes the concept of any material that provides information about the criminal conduct. Production orders typically do not include time limits for production and authorities may alternatively conduct a search and seizure if there are indications that material will not be available as needed. However, financial institutions comply within time frames that are worked out with the authorities.

259. Customer information orders which require the provision of information on whether a person holds an account and basic account details are handled through a production order directed to all banks and distributed through the Bankers Association. Once the results show the target is a customer at a specific bank, the police seek a production order directed to the specific bank. Monitoring orders that require financial institutions to monitor ongoing account activities in an identified account for a specified time period may also issue as needed.

260. As a general rule, seizure/production orders issued by a court are required in order to gather information from a financial institution, but as noted above if seeking such a order would adversely affect the proceeding, the police can seize/order production and, if so requested by the third party, have the matter brought before the court within the 24 hour period after production/seizure. (Section 806(3) AJA). Foreign exchange offices and money transmitters generally make information available without a production order.

Authority to void actions

261. The courts may take steps to prevent or void actions in the nature of legal arrangements devised to defeat recovery of proceeds. Danish courts have invalidated such arrangements on a number of occasions where pro forma sales or transfers of assets took place. Under Danish law, the assets of a perpetrator that may be confiscated include any assets that he has, in reality, control over. In some cases the sale of shares to a dummy entity or the transfer of assets to a company have been declared void or pro forma by the courts. In addition, because of liberal provisions on third party confiscation, authorities have found that they do not often have to go beyond applying these provisions. Voiding may take place however in situations where payment is said to have taken place but where this cannot be proved or when documents regarding a transfer are antedated to a time before the offence.

Additional elements

262. In Denmark, the property of organizations found to be primarily criminal in nature (where the principal function of the organization is to engage in illegal activity) is addressed through the dissolution of the organization by court judgment. Associations formed or that later operate for unlawful purposes may be dissolved. Once dissolved, the association’s assets are subject to confiscation under section 75(5) of the Criminal Code. In addition, the property of an organization can be seized and confiscated if the requirements for third party confiscation are met. In assessing whether an association is operating in an unlawful manner, consideration is given to whether the association works through illegal means including terrorist acts. Associations may be temporarily prohibited by the government, but a dissolution is through the judgment of a court. See, section 684 (1), no. 2, of the AJA. Authorities report that there have not been cases of dissolution of criminal organizations in Denmark.

263. Denmark does not have a system of civil confiscation and has not viewed it as necessary. Recognizing that other States have adopted and actively use such systems, authorities are, on an ongoing basis, evaluating whether it would be useful and would likely improve the effectiveness of the Danish system. However, Denmark has provisions for preventive confiscation and confiscation can occur even when the conduct producing proceeds is not attributable to a particular perpetrator.

Greenland and Faroe Islands

264. Greenland and the Faroe Islands have a capacity to trace, seize and confiscate but the provisions are not as extensive or updated as those that apply in Denmark. The provisions in these jurisdictions were not reviewed by the evaluation team. Danish authorities indicated that both Greenland and the Faroe Islands have provisions that are similar to those in Denmark before the 2002 Anti-Terrorism Act which, among other things, added a provision in the Criminal Code, Section 77a, that permits a kind of preventive confiscation useful in terrorism settings. In Greenland, provisions appear in Section 116-119 of the Criminal Code and search, seizure and tracing provisions appear in the Greenlandic Administration of Justice Act, Chapter 5, Sections 8-9, 9a-9d, and 10-12. Authorities in Denmark note that work has been initiated to bring the Greenlandic and Faroese provisions on tracing, seizure and confiscation up to the same level as those in Denmark.

Statistics

265. Denmark maintains some limited statistics regarding property confiscated as set forth below. However, authorities indicated there were no easily retrievable statistics on property frozen or seized, or the amounts of such property that are ultimately confiscated. Moreover, information on the exact number and type of criminal cases in which confiscation was imposed is not available. Confiscation statistics are not maintained by criminal activity. Accordingly, there is no information of amounts confiscated separately for ML cases or any other type of offence. Based upon reports from the 54 police districts, the following, as to which Danish authorities indicated there was uncertainty, are the approximate total amounts confiscated in the years set forth:

2001	25.0 million DKK (EUR 3,4 million)
2002	28.5 million DKK (EUR 3.8 million)
2003	43.0 million DKK (EUR 5.8 million)
2004	60.5 million DKK (EUR 8.1 million)
2005	72.9 million DKK (EUR 9.8 million)

View Table

2001	25.0 million DKK (EUR 3,4 million)
2002	28.5 million DKK (EUR 3.8 million)
2003	43.0 million DKK (EUR 5.8 million)
2004	60.5 million DKK (EUR 8.1 million)
2005	72.9 million DKK (EUR 9.8 million)

266. Specifically regarding the above figures, no information is available on the number of cases to which they relate and only anecdotal information on the types of cases. Danish authorities indicated that they believed most of the amounts relate to a handful of cases involving drug trafficking or economic crime.

267. Danish authorities also noted that for the 122 individuals who were convicted (or otherwise had fines or administrative decisions imposed) in cases that arose from STR reports for the eleven year period 1994-2005, DKK 199.4 million (EUR 26.7 million) was either retrieved or the subject of a court order that imposed confiscation or supplementary fine. These figures do not indicate amounts actually recovered as some orders to pay may not have been executable.

268. In addition to the amounts confiscated, proceeds are also recovered through compensation to victims, repayment and supplementary fines (which as noted are used as an alternative to confiscation in some instances).

Effectiveness

269. With respect to effectiveness of implementation, the evaluation team did not consider that the authorities were able to establish that they had been fully effective in the task of actually recovering proceeds generated by criminal conduct actionable in Denmark. Denmark has thus far maintained only the bare statistics noted above which indicate gross amounts reflected in orders of confiscation. The authorities indicated there was a great deal of uncertainty surrounding the statistics, and that the statistics provided reflected not amounts recovered but amounts imposed. Nor did the figures provided reveal numbers of cases or relate to specific kinds of criminal activity. Finally, authorities indicated the major parts of the gross amounts provided reflected amounts imposed in a few large drug trafficking and economic crime cases.

S/RES/1267 and 1373

275. Denmark’s framework for implementation of the financing of terrorism aspects S/RES/1267 and subsequent resolutions in the sanctions regime against Al Qaida/Taleban is through EC Regulation 881/2002. Under general European law principles, EU regulations are directly applicable in European national systems (EU member countries) as Denmark without the need for domestic implementing legislation. As such EC regulation 881/2002 serves as statutory law in Denmark. Under the regulation, all funds and economic resources belonging to, or owned or held by a natural or legal person, group or entity designated by the Sanctions Committee and listed in the annex of the regulation shall be frozen. Under EU guidelines, the European Commission updates Regulation 881/2002 every time a change is made to the UN list, if possible within three working days of the UN list change. Denmark has designated the National Agency for Enterprise and Construction (NAEC) as the competent authority under this EU regulation as well as the EU regulation relating to S/RES/1373.

276. Implementation of the financing of terrorism aspects of S/RES/1373 is through EU common position 2001/931/CSFP and EC Regulation 2580/2001. The Council acting in unanimity determines additions to the list of terrorists and terrorist organizations that is attached to Common Position 2001/931. Externally based terrorists or terrorist organization (non EU-based entities or non EU residents or citizens known as “EU externals”) are also covered by Regulation 2580/2001, and are concurrently added to a list attached to the regulation. Financial institutions and others are required to directly implement Regulation 2580/2001 by freezing the assets without delay of the designated persons and entities without prior notice. For persons and entities to which only Common Position 2001/931/CFSP (but not Regulation 2580/2001) applies (EU internals), there is no directly applicable requirement for the freezing of assets. However, all persons and entities that appear on the list attached to Common Position 2001/931 are subjects for increased police and judicial cooperation.

277. Financial institutions and others are required to directly implement EC Regulations 881/2002 and 2580/2001. When additions to the attached lists are published, financial institutions and others who identify a customer whose name is on one of the lists are required to immediately freeze the account or property. Funds should be frozen without prior notification to the persons concerned. Upon freezing, financial institutions and others must notify the National Agency for Enterprise and Construction (NAEC) or the SØK that they have frozen funds. In accordance with the EU regulations, NAEC or SØK is then to report this information to the Commission. NAEC provides written instruction on who to notify, how notification should occur, and the kind of information that should be forwarded in a letter that accompanies the information NAEC distributes to financial institutions and others each time there is an amendment to Regulation 881/2002 or 2580/2001. Assets to be frozen include those owned wholly or jointly as well as those controlled. While the EU Regulation is not explicit on the point of joint ownership, (rather implicitly recognizing that joint ownership is a form of ownership), the EU Best Practice of 29 November 2005 relating to Restrictive Measures, which Danish authorities are prepared to follow, provides that “funds and economic resources jointly owned by a designated person or entity and a non-designated one are in practice covered in their entirety. The non-designated person or entity may subsequently request an authorization to use such funds and economic resources, which may include severing the joint ownership so that person’s share can be unfrozen.”

278. Any freezing (whether pursuant to EC Regulation 881/2002 or 2580/2001) remains in effect until otherwise decided by the EU. No court hearing is required for the freezing to take place and to remain in place. A person or entity whose funds are frozen may always apply to the NAEC for an exemption. This is provided for through the EU regulations. If NAEC, after consultation with the MFA and SØK, decides to refuse the request, the applicant can decide to have the matter presented to a national Danish court. If the challenge is to the legality of a designation under the regulations, the European Court of Justice can hear the complaint if made within two months after the designation. If the legality of a designation is lodged before a Danish court, the court can present this question as a prejudicial question to the European Court of Justice.

279. If the claim is that the freeze is not justified because of mistaken identity, the NAEC will review the case and consult with the MFA and SØK, and if necessary with the EU Council or the UN Sanctions Committee. If the NAEC determines the claim is justified, the freeze will be lifted immediately. In addition, the financial sector as well as other EU Member States and the EU Commission will be informed in order to avoid unjustified freezing in other states.

280. There are no pending freezes of funds or assets in Denmark pursuant to UN/EU listings, nor have any taken place in the past. In many instances, financial institutions have made inquiries to the SØK based upon a potential name match but in each instance the SØK in consultation with appropriate authorities has determined that the account was not that of a person/entity on the list. The FIU treats these inquiries as STRs and there have been over 200 in the period from September 2001 through the end of 2005.

281. For the lists of persons and entities designated for freezing purposes through the EU regulations, Denmark has a full capacity to freeze funds in accordance with S/RES/1267 and S/RES/1373 directly through the EU regulation mechanisms. For persons and entities not on lists for which freezing is required, both EU internals (covered by Common Position 2001/931 but not Regulation 2580/2001) and persons and entities who do not appear on any lists, but for which Denmark receives a direct freezing request from other jurisdictions, as well as circumstances where a freeze is necessary because of other information that indicates a possibility of financing of terrorism (e.g. information received through a STR), the EU regime for freezing is unavailable. In such circumstances, Denmark has a court based mechanism for seizure and confiscation of terrorist funds. See the description of that mechanism under the section below.

Freezing, Seizing in other circumstances

282. For the freezing of assets of EU internals (to which Common Position 2001/931 but not Regulation 2580/2001 applies) and persons and entities who do not appear on any lists, but for which Denmark receives a direct freezing request from another jurisdiction, as well as circumstances where a freeze is necessary because of other information that indicates a possibility of financing of terrorism (e.g. information received through a STR) the same procedures apply. In these cases the revised and updated mechanisms under the provisions of the Danish Criminal Code and criminal procedure law are utilized. These mechanisms, with one exception appear to meet the requirements of obligations imposed by S/RES/1373. Denmark amended its Criminal Code in 2002 through the Anti-Terrorism Act of June 2002 to ensure that seizures and confiscation could reach fully terrorist assets. Both Sections 802 and 803 of the AJA (for seizures) and Section 77a of the Criminal Code (for confiscation) were amended to extend their scope to money and other property and not just objects.

283. In its current form, Section 77a of the Criminal Code provides for preventive confiscation of any assets, including funds and objects, which may be applied to commit crimes. In addition, seizures (which include in Denmark the concept of freezing) are authorized under Section 801-806 of the AJA on the basis that there are reasonable grounds to suspect an individual committed an offence and seizure is necessary to secure evidence or the claim for confiscation (including preventive confiscation)

284. Authorities indicate that the seizure would take place on an immediate basis both because of the obligation of the institution to freeze (which applies even when there is a suspicion relating to a person not on the list) and because police in exigent circumstances can issue a seizure order and seek approval thereafter (see section 806(3) of the AJA). In addition, the reasonable grounds standard equates with the reasonable basis, which a foreign authority is to submit. In these circumstances, funds collected that may be used to finance terrorism may be seized and confiscated.

285. However there is not a basis for (nor policy in favor of) seizing funds collected/received, etc. to support terrorists or terrorist organizations for non-terrorism related activities. This is unlike the funds frozen pursuant to the EU regulations, which call for the freezing of all funds and other assets belonging to persons or entities on the list and a prohibition on making assets available to such persons regardless of the purpose for which they may be used. Using these alternate procedures, Denmark may thus not freeze all funds and assets of persons who commit or attempt to commit or participate in or facilitate the commission of terrorist acts, but only those funds that will be used for terrorism purposes.

286. Danish authorities explained that they view the freezing requirements of S/RES/1373 (2001) as covering only assets that will be used in one way or another for terrorism purposes, and would not act to freeze assets for other purposes outside of the obligations with respect to persons who have been listed for whom the wider obligation is applied. They believe that Article 1(c) of S/RES/1373 must be read in the context of Article 8 of the Terrorist Financing Convention which requires measures to identify, detect, freeze or seize “any funds used or allocated for the purpose of committing [a terrorist act]. The Danish view is that the condition of a connection to a terrorist act must be taken into account in interpreting Article 1(c) of S/RES/1373. They state that outside situations where there is a direct legal basis in a UN Resolution or EU regulation, freezing assets that are beyond those that might in one way or another be used for terrorism purposes might conflict with the Danish Constitution or the European Convention for the Protection of Human Rights and Fundamental Freedoms. They believe their interpretation is consistent with the principles on the law of property set forth in Section 73 of the Danish Constitution and the first Additional Protocol to the European Convention for the Protection of Human Rights.

287. S/RES/1373 requires under Section 1(c) that nations freeze “funds, and other financial assets or economic resources of persons who commit or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts..SRIII sets forth the standard that there be measures to freeze without delay funds or other assets of terrorists, those who finance terrorism and terrorist organizations in accordance with the UN Resolutions. Although Danish authorities have a different view, the resolution appears to go further than the Terrorist Financing Convention with a requirement that all resources of those who participate in or facilitate the commission of a terrorist act (including by collecting or providing funds), not merely funds that are intended for use in the commission of the crime be frozen.

288. With respect to the obligation to act without delay, as noted the procedures for seizure (freezing) under Danish law provide for such actions to take place in exigent circumstances without a court order. Prosecutors may thereafter seek and receive the order. Accordingly a call to a financial institution by police authorities is sufficient. In addition, if a matter arises through a STR, under section 7(4) of Denmark’s MLA, the filing party must not carry out the transaction without the consent of SØK.

289. Regardless of whether there is a freeze occurring by operation of an EU regulation or a seizure through the criminal processes, there is no prior notice to the holder of the asset. See sections 748 (1) and (6) and 189(1) of the AJA. In addition, as noted above, the freeze may apply to assets wholly or jointly owned or controlled as well as funds derived or generated from such assets. This is provided for in the EU context through the regulations and best practices and also permitted under seizure and confiscation provisions of Danish domestic law. Danish courts in other settings have addressed control and looked to the underlying reality.

290. The MFA co-ordinates Danish positions regarding EU designations. While there are not formal processes in place to have all interested parties, including MOJ (including the SØK and Danish Security Intelligence Service) consider whether to support a request for a designation, authorities indicate that there is close cooperation between these authorities on financing of terrorism matters and the relevant parties would formulate a request for a designation through the building of a case by SØK in consultation with the Danish Security Intelligence Service which would then be forwarded through the MOJ to the MFA. Because of urgency and the priority given to such matters, this could occur quickly once it appeared a designation was appropriate.

Communication and guidance to Financial Institutions and other potential stake holders

291. With respect to communication and guidance, Denmark relies in large part on the EU regulations itself to guide financial institutions and others. The EU regulations have direct applicability to all EU entities and persons including those in Denmark and there is a related obligation of Denmark’s citizens and residents to know and act in accordance with the law. The EU regulations list the contact point in Denmark as the NAEC. The NAEC has taken steps to ensure many affected persons (those that must take the freezing action) are actually informed on a timely basis, but particularly for some sectors as noted below, there were not at the time of the mission regular and effective steps to provide guidance or to ensure actual notification.

292. EU legislation, including amendments to the lists pursuant to the Regulations implementing S/RES/1267 and S/RES/1373, is made public in the official journal of the EU (accessible through the Internet) and is thereby binding as law on Danish financial institutions and other entities and persons. The Sanctions Division at the European Commission usually also notifies Member States through an email before an amended list is published. This amended list as well as the early notification is emailed both to NAEC and to SØK.

293. Denmark has a good system in place to distribute updates to both UN and EU lists and does not rely solely on institutions and others accessing updates to the publication in EU’s Official Journal. Rather NAEC distributes such lists directly to a wide range of trade and industry associations and government bodies. Authorities noted the distribution as an information service and not a legal requirement.

294. When distributing the updates to financial institutions and associations, the NAEC recommends that they should undertake a subsequent distribution to their members. Among the associations outside the financial sector to whom the lists are distributed are the Danish Shipowners Association, the Danish Chamber of Commerce (for Trade, Industry and Service), the Bar and Law Society and the Danish Fund Raising Association. Within government, the lists are distributed, among others, to the Danish Commerce and Company Agency, the Financial Supervisory Authority, the Central Bank, SØK and the Foreign Ministry. For this distribution, it would be helpful for it to also cover real estate agents and brokers. Authorities undertook to do this on a post-mission basis. Danish authorities noted that as NAEC is distributing lists simply to provide information regarding a matter that Danish persons and entities have an obligation to maintain awareness, NAEC does not follow up on how quickly lists are disseminated by these organizations and is not specifically aware whether associations actually distribute the lists other than with respect to the banking industry. In addition, the EU has an electronic database that has all designees covered by all EU regulations on financial sanctions that is generally available.

295. With the exception of the distribution of the lists to associations most of which represent financial institutions of one kind or another, there are no specific measures to ensure that persons who hold assets are informed of the listings. For instance, tangible or real property may be held or registered in the name of a listed person, yet checks are not apparently routinely made and appropriate action taken to ensure the property is actually encumbered. In particular, although law enforcement officials check listed names against various databases, it does not appear there is a routine check of property ownership registers (for instance real estate and ships) to determine whether a named individual or organization holds property in Denmark and action taken to encumber property. There should also be notification to those who are involved in real estate and vessel purchases and transfers. Authorities are considering whether it would be useful to conduct more outreach and awareness training regarding the lists particularly outside the financial sector.

296. In addition Denmark’s Ministry of Foreign Affairs distributes all changes made to the UN list as soon as the Ministry is notified by email by the Al Qaida/Taleban Sanctions Committee. This notification goes to a number of agencies, including NAEC and to SØK.

297. Lists of terrorists and terrorist organizations from other jurisdictions are received by the FIU or the MFA. The FIU distributes these lists (assuming that the sending agency is in agreement) immediately to the Banker’s Association so that banks can review their customer lists and send STRs as appropriate. There must be a special effort regarding these lists, which unlike others, are not available publicly (on EU web-sites, etc.) to ensure they are fully and carefully disseminated and receive dissemination beyond banking institutions.

298. Danish authorities have have produced some practical written guidance for the financial sector and designated non-financial businesses and professions and others that may be holding funds or other assets concerning their obligations under the freezing regime and procedures to address the lists. As noted, the NAEC provides written instruction on who and how to notify and the kind of information needed in the letter that accompanies the distribution of information to financial institutions and others on amendments to Regulations 881/2002 and 2580/2001. In addition the NAEC provides in an introductory letter to all new parties background information on these regulations, information on cooperation between authorities and what to do in stituations of name and identity matches including links to relevant web pages. However, an underscoring of the obligation to promptly check listed names against account and customer lists, etc.), information on procedures for exceptions to the freezing rules for humanitarian reasons, for delisting and the like would be helpful particularly for institutions other than banks that have less experience in handling lists. Even though the EU, in addition to issuing the two EU regulations, which identify basic obligations, has issued a Best Practices Guide that sets forth procedures for Member States to follow, it does not contain practical advice for responding institutions and persons within a national framework. It would be helpful for there to be written guidance that explains procedures and obligations so that all Danish entities are aware, on a practical level, of how these matters are to be handled within Denmark.

Procedures for delisting and unfreezing

299. Denmark has no Danish citizens or residents who are listed, or who have previously been listed, in the EU lists related to UN Resolutions S/RES/1267 and S/RES/1373. Accordingly, on a practical level, it has not had to address de-listing. In addition, there have not been freezes of funds of persons listed in the EU lists. There are however applicable procedures should de-listing or unfreezing be required in the future. Relevant European regulations do not provide for a national autonomous decision regarding de-listing and unfreezing as a whole.

300. Requests for de-listing from the list of persons and entities comprised by the UN sanctions against Al Qaida and the Taleban (the UN list) and the list of persons and entities comprised by the restrictive measures in EU Common Position 931/2001/CFSP (the EU list) are to be directed to the MFA. If a request is filed with another Danish public authority, e.g. the MOJ or the Agency for Enterprises and Construction, this authority should redirect the request to the MFA with a view to obtaining a coordinated Danish position. Danish authorities have not so far received any requests for de-listing from the UN or the EU lists.

301. If a request for de-listing relates to the UN list, the procedure for de-listing is that laid down in the Al Qaida/Taleban Sanctions Committee guidelines. As a first step the MFA will determine if the petitioner is a Danish citizen or resident. If this is not the case the petitioner will be instructed to file the request to the government of citizenship or residence. If the petitioner is a Danish citizen or resident, the Ministry will review all relevant information (in co-operation with other relevant Danish ministries/agencies, e.g. the Security Intelligence Service and the Defence Intelligence Service) and approach bilaterally the government(s) originally proposing designation to seek additional information and to hold consultations on the de-listing request. If needed, consultations will also be arranged with the Chairman of the Al Qaida/Taleban Sanctions Committee. If the Danish Government after having reviewed all relevant information wishes to pursue the de-listing request, it will seek to persuade the designating government(s) to submit jointly or separately a request for de-listing to the Al Qaida/Taleban Sanctions Committee. If the designating governments(s) do not wish to submit a joint or separate request, and the Danish Government still wishes to pursue the matter, a separate Danish request for de-listing will be submitted to the Al Qaida/Taleban Sanctions Committee. Should the Sanctions Committee de-list, there is a corresponding de-listing by the EU Council in its Regulation 881/2002 and the result is an immediate unfreezing of assets.

302. If a request for de-listing relates to the EU list, the MFA will review all relevant information (in cooperation with other relevant Danish ministries/agencies, e.g. the Security Intelligence Service and the Defence Intelligence Service) and approach bilaterally the government originally proposing designation to seek additional information and to hold consultations on the de-listing request. It is noted that all listed persons and entities can petition any EU member country with a request for de-listing. If the Danish Government after having reviewed all relevant information wishes to pursue the de-listing request, the MFA will strive to convince other EU Council members about the legitimacy of the de-listing request.

303. Delisting matters may also be pursued before the Danish and EU courts.

304. Unfreezing in the case of mistaken identity may take place in the Danish system in accordance with the EU Best Practices paper (“Effective Implementation of Financial Restrictive Measures targeting Terrorist Persons, Groups or Entities”), that is, a person may have his case considered by the NAEC which serves as the Danish competent authority. The NAEC may conclude that the freeze should be lifted after verification that the person or entity is not the designated person. If it cannot come to a conclusion, and advise the financial institution or other entity of its conclusion, the party is free to follow the procedures available that protect third party interests. To avoid unjustified freezings in the first place, Denmark has financial institutions report names as to which there might be some question to the NAEC or SØK. These are reviewed immediately by SØK and the Danish Security Intelligence Service and they provide advice regarding the necessity of an immediate freeze. If the agencies decide there may be a match, assets are frozen while the identity question is clarified. In the case of seizures that take place relating to EU nationals or other non-designated persons, Danish courts have jurisdiction to hear such matters. Where a freeze occurs pursuant to a bi-lateral request, as a domestic court based mechanism is used for the freeze, the procedure for unfreezing is through the request of the appropriate authority or affected person to authorities in Denmark to lift the freeze.

Bona Fide Third Parties

305. The usual protections under Danish law to the rights of bona fide third parties are applicable in the case of freezing under the EU lists or a seizure otherwise ordered in the Danish system. Specifically, there is access to the courts in Denmark to challenge aspects of a freeze that adversely affects a person or entity. The court could in turn seek the advice of the European Court of Justice. In addition, if the freeze is imposed through Regulation 881/2002 or 2580/2001, persons or entities may institute proceedings before the European Court of Justice which is invested with authority to review the legality of such freezes. EC regulation 881/2002 at Article 6 also protects the good faith actions of freezing entities except when a freeze is due to negligence. This provision is directly applicable in Denmark.

Monitoring compliance

306. Denmark’s MLA imposes a reporting obligation on institutions and undertakings to report suspicions of the financing of terrorism whether that suspicion is based upon the appearance of a name upon a list or upon other independent grounds and provides for monitoring of compliance with various obligations including an obligation to review complex, unusual large transactions and unusual patterns of transactions with no apparent economic or visible lawful purpose, as well as for the maintenance of appropriate systems.

307. For financial institutions, the FSA has responsibility for ensuring compliance with obligations under the act and covers systems to comply with reporting under the UN resolutions/EU Regulations as part of its inspection process. For other sectors, the agency with supervisory responsibility under the above act also has responsibility for ensuring compliance with the obligation. In each instance, the same sanctions as for non-compliance with the general reporting and other obligations apply. See, Section 3.10 (financial institutions) and 4.4 (non-financial businesses and persons). Separately and in addition, a violation of the EU regulation is punishable under the Danish Criminal Code, Section 110c(3). Under that provision, persons who contravene specified EU regulations are liable to a fine or imprisonment for a term of four months, or in aggravating circumstances, to a term of four years.

308. On a practical level, financial institutions noted that they have reported to the FIU regarding possible name matches on a number of occasions and have awaited further instruction, but have not always received feedback from the FIU indicating on a positive basis that the account holder was not a match. Under Section 7-4 of the MLA, if an undertaking covered by the Act (as a financial institution) has a suspicion relating to the financing of terrorism, transactions in the account or from the person under suspicion may only be carried out with the consent of the Public Prosecutor who must decide by the end of the day following receipt of the notification whether seizure is to be effected. It is important that the Public Prosecutor notify banks and other institutions when they have provided notification of a possible name match on a timely basis whether they may proceed with transactions on the account.

Access to funds for expenses

309. S/RES/1452 is implemented in the EU through a new Article 2a in EC Regulation 881/2002 that authorizes access to funds that are frozen for basic expenses, certain fees or for extraordinary expenses. The Danish competent authority that is to receive requests for exemptions is the NAEC which determines if the request merits action. If so, the request is addressed to the Al-Qaida/Taleban sanctions Committee. A procedure is also envisioned in Article 5 and 6 of EC Regulation 2580/2001 which relates to designations emanating from S/RES/1373. The NAEC may grant a specific authorization to unfreeze funds for essential human needs under such conditions as it deems appropriate and under Best Practices coordinate such matters with other member States. These procedures have not been employed in Denmark as there have been no freezes pursuant to the EU/UN lists.

Greenland and Faroe Islands

310. Greenland and the Faroe Islands would use their domestic provisions on seizure to effect a freeze under UN resolutions. An ability to fully comply with the UN resolutions, for these jurisdictions neither of which are members of the EU (and therefore to which the directly applicable EU regulations would not apply), is dependant upon a legal framework that provides for full criminalization of terrorist financing together with a legal provisions for provisional measures that would ensure immediate freezes in appropriate settings (see discussion above of the measures applicable in Denmark.) Finally, there do not appear yet to be practical arrangements in place to ensure that the resolutions will always be appropriately applied, persons notified, etc. although there is ongoing dialogue on the division of internal responsibilities between Denmark and these jurisdictions in a number of areas including UN Resolution implementation.

Additional elements

311. A pre-notification system of upcoming designations is in place within the EU to ensure that simultaneous actions can be taken by States in order to freeze terrorists’ assets. Denmark is able to share information with other countries and would, if it became applicable, be able to make public amounts frozen pursuant to orders.

Statistics

312. Danish authorities are prepared to keep statistics on the number of persons entities having property frozen pursuant to UN Resolutions and the amounts. The NAEC is to be advised of any freezes relating to those on UN/EU lists and SØK will have information regarding freezes based upon use of domestic mechanisms. Thus far, as there have been no relevant freezes, there are no statistics or amounts.

Anonymous accounts

448. Although Denmark has no explicit provision or regulation prohibiting the existence of anonymous accounts, anonymous accounts are effectively prohibited by the customer identification requirements of the MLA and by tax legislation. The Act on Tax Management (Section 8H) provides that banks, stockbrokers and any other entity that accepts deposits with interest have to report every year to the tax authorities the name, address and personal registration number/business registration number of each account holder.

449. According to Section 12.1 of the MLA financial institutions must require that their customers provide proof of identity when establishing business relationships with them, including the opening of an account or a safe custody. This requirement was established by sec. 4.1 of the previous Act, which entered into force on 1 July 1993 and covers all new customers since that date. Before then there were not clear obligations to identify customers when establishing business relationships or opening bank account. Section 40 of the former Act on Savings Banks and Commercial Banks (1930) provided identification requirements only in the case of opening a deposit account. The authorities explained that they could not exclude in principle the existence of accounts, established before 1993, which could be anonymous (and with reference to this point the explanatory note make clear that identification will have to be undertaken “if there are existing anonymous accounts or accounts under another name than the account owner, which were established before the Act entered into force, or if such accounts exist otherwise”), however this would appear to be an hypothetical case. According to the banks interviewed and to the FSA there are no anonymous accounts, nor there is any practice of numbered accounts, which are therefore not provided in Denmark.

When CDD is required

450. The MLA requires financial institutions to undertake CDD measures in the following circumstances:

• when establishing business relationships with the customers, including the opening of an account or a safe custody (section 12.1);

• in the case of occasional customers, for each transaction whose value is of EUR 15.000 or more. In this case the identification requirement applies irrespective of whether the transaction is completed in one or more related operations, if these appear connected (section 14.1);

• if there is a suspicion that the transaction is associated with ML or FT covered by the reporting obligation (section 11);

• in the case of doubts about the veracity or adequacy of previously obtained customer identification data (section 12.6.);

451. The current Act does not provide identification requirements in the case of wire transfers, under the circumstances covered by SR VII. As such they are treated as occasional transactions for which identification is only required if EUR 15.000 or more.

452. The identification requirements required in the establishment of a business relationship and the opening of a bank account in the case of occasional customers and in the case of suspicion of ML and TF were already provided for in the previous Act (and therefore relevant requirements are also applicable in Greenland and the Faroe Islands, with reference to ML only). The identification requirements in the case of doubts about veracity/adequacy as mentioned under 4) were introduced by the new Act.

453. The obligation to identify in the case of suspicion of ML or TF is a general requirement, which must be applied irrespective of whether the customer relationship is permanent or occasional, the amount, etc. Therefore, the exemptions from the identification requirements set forth in the act (sections 20 and 21, described later on) cannot be applied in these circumstances. Consequently, in the case of suspicion of ML or TF, the obligation to identify applies also in the case of occasional customers where the transaction is less than EUR 15,000.

Required CDD Measures

454. All citizens and residents in Denmark are registered in the National Civil Register and have a CPR number (civil registry number) The CPR is made of 10 digits (the first 6 digits indicate the date of birth and the last 4 are the numbers that uniquely identify all people living in Denmark). The CPR number is used for registration and personal identification, and is a unique identifying number for each individual used as universal identification registration. Each business that is registered in the Central Business Register (CVR) is also assigned a number for registration purposes.

455. According to the language of the previous and the current Act the obligation for financial institutions to identify the clientele consists of the obligation to require that their customers provide proof of identity (“kraeve at deres kunder legitimerer sig”).

456. There is no direct requirement to use reliable and independent identification data in verifying the customer’s identity, nor is there an indication of the types of documents which are to be verified during the identification process. The explanatory notes, however, clearly set out that it is the responsibility of the covered institutions to obtain certain proof of the customer’s identity, which must be confirmed with the necessary documentation. Furthermore the notes explain that “proof of identity” comprises identification of the customer as well as checking the relevant information concerning the identity using reliable identity documentation. In clarifying this point the explanatory notes recall Article 7 of the EU Third Directive, which states that checking the identity of a customer should be on the basis of documents, data or information obtained from reliable and independent sources. The new Guidelines issued by the Bankers Association also indicate that the information concerning identity must be checked on the basis of reliable identification documents. Similar provision, however, was not contained in the Guidelines issued in 2003.

457. According to the Act, in the case of natural persons (section 12.2) proof of identity will include name, address, the national registration number (CPR number) or similar documentation if the person in question does not have a CPR number; whereas in the case of legal persons (section 12.3) the proof of identity will include name, address, business registration number (CVR number) or similar documentation if the undertaking does not have a CVR number. As mentioned later on (see para. 462) there is no requirement to verify, in the case of a legal person, that the individual purporting to act on behalf of the legal person is so authorized nor to identify and verify the identity of that person.

458. The explanatory notes indicate that the amount of documentation required for adequate proof of identity of a customer, be it a natural person or an undertaking, will depend on a specific assessment of the relevant case. In the case of persons who are not resident in Denmark, the notes indicate as an alternative to a CPR number the passport number combined with information about date of birth and place of birth (birth data), or a similar unequivocal identification number combined with this birth data. In the case of an undertaking which is not registered in Denmark the notes explain that the “similar identification” (to the CVR) can be “another type of identifiable registration number”.

459. For the banking sector (not applicable to other financial institutions) the (non binding) Guidelines issued by the Bankers Association (both previous and current version) indicate the kind of documents that should be preferred in the identification process. There is no recommendation to rely solely on photographic identification documents, although the new Guidelines acknowledge that photographic identification is a safe way of identifying customers. the following identification documents are recommended:

• 1) with photographs

  • EU driver’s license

  • Valid passport

  • ID cards issued by Danish banks

  • Other officially recognized ID cards

  • Identity card from the Danish Defense

  • NATO passport

  • Passport receipt (blue card with photo)

  • Police identification card

  • Press card

• 2) or without photograph, but with the CPR number (with the exception of the students card):

  • Danish national health service card (with CPR number)

  • Certificate of baptism/name (with CPR number)

  • Tax card (with CPR number)

  • Student card.

460. For the documents listed under 2, while the CPR number can be correlated with the National Register of Persons to confirm the name and the address, this is not however sufficient to prove that the person is the true owner of the document, as acknowledged by the new Guidelines. In the case of a student card there is not even a reference to the CPR. The guidelines indicate that in these cases it is the responsibility of the bank to determine whether the identity of the customer corresponds to the one of the bearer of the document, based on a risk assessment.

461. “Undertakings” are defined under section 3.2 as “companies and other similar legal arrangements”. According to the Explanatory notes “legal arrangements” would refer to foreign forms for undertakings and associations which are not known in the Danish legal system, such as trusts. In this respect the obligations of the MLA to identify the beneficial owner also apply in relation to customers from outside Denmark (therefore also to trusts, as we will see. In the case of “undertakings” proof of identity must include name, address, business registration number (CVR number) or similar documentation if the undertaking does not have a CVR number (section 12.3). However there is no requirement in the law to verify, in the case of a legal person or arrangement, that the individual purporting to act on behalf of the legal person or arrangement is so authorized nor to identify and verify the identity of that person. Authorities assert that this occurs in practice. Section 12(3) also requires that financial institutions take reasonable steps to ascertain the ownership and control structure. The explanatory notes indicate that this should be interpreted as a requirement to “obtain information about the legal form of the customer, the controlling interests, management, and provisions regulating the powers to bind the customer”.

462. The guidelines issued by the Danish Bankers Association for the banking sector (both previous and current version) indicate the kind of documents that should be preferred in the identification process of legal persons, based on various circumstances (i.e., whether the company is registered or not with the DCCA; associations and funds that do not have CVR; sole proprietorship; companies registered outside Denmark; foreign companies that are not registered abroad). These are:

A) In the case of limited companies and limited liability companies and limited liability undertakings, corporate funds and associations which are registered with the Danish Commerce and Companies Agency, the identity information indicated should include:

• The name of the company/association

• CVR number

• Address, including postal address

It is optional to require a summary of registration (which should be no more than a year old) from the DCCA, where the names of the board of directors and the board of management as well as regulations governing the powers to sign for the company are indicated.

B) In the case of companies and associations that are not registered with the DCCA, but who have a CVR number from the Central Customs and Tax Administration, the identity information must include:

• The name of the company/association

• CVR number

• Address, including postal address

• Names, including CPR numbers, of members of the board of directors and/or executive managers

• Articles of association including regulations governing the powers to sign for the company

It is optional to require the current transcript from the Central Business Register with name and CPR number of the fully liable members.

C) In the case of associations and funds that do not have a CVR number the identity information must include:

• The name of the association or fund

• Names of the management and/or executive manager, indicating CPR numbers

• Articles of association including regulations governing the powers to sign for the company

It is optional to require:

• A copy of the articles of association

• Minutes from the general meeting or memorandum of association including names and CPR numbers of the management, signed by the founders or the entire board of directors and confirmed by the chairman or the company’s lawyer.

D) In the case of sole proprietorships the identity information must include:

• The name of the person and the undertaking

• CPR and CVR numbers

• Address, including postal address for both the person and the undertaking

It is optional to require:

• Proof of identity including CPR number as in the case of natural persons.

E) In the case of companies registered outside Denmark, a transcript about the company, possibly certified, may be obtained from the foreign official registration office. In case of doubt about the authenticity, the transcript may be submitted for certification with the local Danish consulate or the company’s bank.

F) In the case of foreign companies etc. that are not registered with a foreign register, the information required is the same as in the case of associations and funds that do not have a CVR number; this information may be submitted for certification with the local Danish consulate or the company’s bank.

463. While these requirements – which are not mandatory and are targeted to the banking sector – could be considered sufficient for the identification process of a legal entity; they are not per se enough for the process of ascertaining beneficial ownership in the case of legal companies/arrangements.

464. The previous MLA did not contain any obligation to identify the beneficial owner. The system appeared to be rather weak especially in the case of legal arrangements as there was no specific obligation to take reasonable measures to understand the control structure of legal arrangements nor to determine who are the natural persons that ultimately own or control the customer. While the guidelines issued by the Bankers Association in 2003 recommend that certain information be obtained in the case of legal arrangements they were not legally enforceable. Besides, those Guidelines made it clear that “there is no requirement that the bank must request proof of identity from the owners (shareholders etc.) behind the companies”. However, the guidelines did highlight some special situations where the bank – as part of its compliance with the “know-your-customer” principle – would need to familiarize itself with the owners and the ownership structure behind the company, such as in the case of foreign companies from e.g. politically unstable countries, countries with high crime rates or less developed countries.

465. The new Act sets forth provisions regarding the identification of beneficial owners. The beneficial owner is defined in section 3 4), according to the definition included in the third EU directive as: “The natural persons who ultimately own or control the customer or the natural person on whose behalf a transaction or activity is being conducted, including:

1. Persons who ultimately own or control a company through direct or indirect ownership or control more than 25 per cent of the ownership interests or the voting rights in the company, except companies the ownership interests of which are traded on a regulated market.

2. Persons who otherwise exercise control over the management of a company.

3. Persons who, according to the articles of association of a fund or in another manner, are to receive 25 per cent or more of the distribution funds from a fund or another similar legal arrangement or other property, if the persons are known.

4. The group of persons, in whose main interest a fund or another similar legal arrangement has been set up or operates.

5. Persons who exercise control over 25 per cent or more of the distribution funds from a fund or another similar legal arrangement or other property”.

466. According to the explanatory notes, the provision is based on a specific assessment of when a natural person can be deemed to have a controlling interest in an undertaking or in a legal arrangement which is a customer. The notes explain that controlling interest partly depends on the ownership of holdings/shares and voting rights as well as the undertaking’s Articles of association and other agreements such as shareholder agreements and division of shares into classes; therefore the assessment on the beneficial owner should be carried out back to the one or more natural persons with ultimate control of the undertaking. If a natural person has a mortgage on the shares of an undertaking and if the voting rights linked to these shares follow the mortgage, then this person will also be the beneficial owner provided, on the basis of a specific assessment, these voting rights give a controlling interest.

467. The definition of the beneficial owner contained in the new Act transposes the standard set forth in the EU Directive (i.e., based on the 25% threshold that automatically determines the case of control in a company) as examples of situations of beneficial ownership, but which are not intended to be exhaustive. The explanatory notes clarify that the definitions contained in paras. a)-e) of the provision are only examples and leave space for a more substantial inquiry in ascertaining who the ultimate owner, which is not necessary based on the 25% threshold. In this respect the notes quote the case of a person who, for example, owns a smaller percentage of the capital of an undertaking, which could nevertheless also be deemed as a beneficial owner under the general definition of the Act, given the particular circumstances of the situation.

468. As mentioned, para. a) of section 3, 4) refers to the case of ownership or control of more than 25% of the ownership interests or the voting rights in a company as giving a controlling interest in the company. The provision in para. b) refer to the case of persons, other than in the circumstances set forth in para. a), who exercise control of the management of a company, as the case of persons with the right to appoint or remove the majority of the members of the company’s board of directors or similar management body. Paras. c)-e) result from Article 3 (6) (b) of the Directive which lists examples of legal entities, such as foundations and legal arrangements, such as trusts which administer and distribute funds. The explanatory notes refer to these circumstances as being particularly relevant for trusts (i.e., foreign trusts, as trust is an institutions which is not known in Danish law). In the case in which the beneficiaries are not yet determined, it is sufficient,, according to para. d), to note the group of persons in whose interests a trust or a Danish fund is established or acts. This again reflects the position of the Third EU Directive which, at recital 9, says that in the case of a foundation or trust, if the beneficiaries are yet to be determined and is therefore impossible to identify an individual as the beneficial owner, it would suffice to identity the class of persons intended to be the beneficiaries of the foundation or trust. With respect to foundations, according to the explanatory notes it is not relevant to focus on persons who are to receive more than 25% of the fund’s property under para. c), because a foundation may only make distributions of its distributable reserves. Therefore it will be relevant to examine whether there are people who are to receive more than 25% of the foundation’s distributable funds. Finally, with regard to para. e), persons who exercise control of at least 25% of the distributable funds of a Danish foundations will include the board of directors who manage the fund observing the objects of the fund and any provisions on distributions. In a trust, persons who exercise control of at least 25 per cent of the trust’s property could also include the founder of the trust as the founder could also be the trustee.

469. There is not a direct and express obligation for financial institution to determine whether the customer is acting on behalf of another person and to take reasonable steps to obtain sufficient identification data to verify the identity of that other person, and the current requirement is too restrictive. In fact, section 15 is limited to circumstance where the covered entities have “knowledge or presumption that a person other than the one they are in contact with is the beneficial customer”.

470. Section 12.3 of the Act sets forth the obligation to identify beneficial owner by stating that, “reasonable steps shall be taken to ascertain the undertaking’s ownership and control structure and the undertaking’s beneficial owners shall be identified”. The obligation to identify the beneficial owner, however, does not apply when the beneficial owner has funds in a client’s account of a notary or a lawyer, if the notary or the lawyer is subject to regulations corresponding to the MLA, upon the condition that information about the identity of the beneficial owner etc. is made available to the account-holding institution when said institution requests this (section 21(1). The provision does not specify the information or data required in the identification of the beneficial owner, nor does it refer to the verification process.

471. It remains to be seen how these provisions will be implemented. Guidance is likely to be needed. Moreover, the Danish Bankers Association guidelines are incomplete in regard to the identification of the beneficial owner. The Central Business Register (CVR, to which the Guidelines refer) does not contain information on beneficial ownership of companies. Information on public limited companies or private limited companies is available in the shareholder register. This register, which contains limited beneficial ownership information with respect to bearer share companies) is not accessible to the public. The only information publicly available upon request is, in the case of a public company, where any shareholder has reached the 5% of the capital or of the voting rights and, in the case of a private company, in a situation in which all shares are held by a single shareholder.

472. There was no requirement under the previous Act for financial institutions to obtain information on the purpose and intended nature of business relationship. Section 12.4 of the new Act requires now financial institutions to obtain information about each customer’s objective regarding the business relationship and the intended extent hereof.

473. There was no requirement under the previous Act regarding ongoing due diligence on the business relationship, nor was it required that the documents and data obtained during the CDD process be kept up-to-date. Section 12.5 of the act now requires financial institution to monitor customer relationship and transactions on a regular basis and oblige them to keep up to date documents, data and other relevant information. The provision requires transactions undertaken throughout the course of said relationship to be monitored to ensure that the transactions being conducted are consistent with the undertaking’s or person’s knowledge of the customer and the customer’s business and risk profile, including, where necessary, the source of the funds. However this provision will only enter in to force on January 1, 2007, and there are therefore no current requirements.

474. The previous Act did not provide any requirement for enhanced customer due diligence for higher risk customers, business relationships or transactions. Section 19 of the new Act sets forth enhanced due diligence requirements “in situations which by their nature can present a higher risk of money laundering and terrorist financing”. According to the explanatory notes, the enhanced customer due diligence measures should be based on a risk assessment and should apply in situations which by their nature can present a higher risk of money laundering and financing of terrorism. Section 19 is to be applied, at minimum, in the following circumstances:

• for all financial institutions, where the customer has not been physically present for identification purposes,

• for banks, mortgage credit institutions and electronic money institutions in the case of cross-border correspondent banking relationships with banks and institutions from countries outside the European Union with which the Community has not entered into an agreement for the financial area

• for all financial institutions, in the case of non domestic PEP.

475. This provision is not currently in force. It enters into force on January 1, 2007. Despite the indication that these are only “minimum” requirements, there is a risk that financial institutions will focus largely on the above-prescribed higher risk circumstances. This is all the more so as there is no guidance (neither from the authorities nor from the Danish Bankers Association) as to what might constitute higher risk circumstances (e.g., non-resident customers, private banking, legal persons or arrangements such as trusts that are personal assets holding vehicles or to companies that have nominee shareholders or sharer in bearer forms as requiring enhanced CDD). (Requirements concerning non-face-to face transactions, correspondent banking and PEPs are addressed under the relevant Recommendations.)

476. Exemptions: Unless there is a suspicion of ML or TF, the identity requirements set forth in Sec. 12 of the Act and the Enhanced due diligence requirements set forth for the case of customers not physically present at the time of identification do not apply in some circumstances, on the assumption of a low risk of ML or TF. These are indicated in section 20.1. and 21.1 and 2 of the Act. According to section 20.1, CDD is not required in the case of:

• Life-assurance and pension contracts if the amount of the annual premium is equivalent to EUR 1,000 or less or, in the case of a single premium, if the amount of the single premium is equivalent to EUR 2,500 or less.

• Life-assurance and pension contracts entered into in pursuance of a contract of employment or the business of the insured party, provided the agreement does not feature a buy-back clause and cannot be used as collateral for a loan.

• Life-assurance and pension contracts where the premium or the contribution is to be debited to the customer’s bank account.

• In this case the requirement concerning proof of identity is regarded as met when it is ascertained that the premium or contribution from the pension saver is to be debited from an account opened in the name of the pension saver in accordance with the identification requirements set forth in section 12.

• Life-assurance and pension contracts entered into in pursuance of a contract of employment or the business of the insured party with a limited buy-back clause, provided that proof of identity is given if the customer makes use of the buy-back clause.

• The explanatory notes indicate the event of emigration of the customer as an example of a limited buy-back clause.

• Electronic money, where the maximum amount stored on non-rechargeable cards cannot exceed EUR 150, or where the maximum amount stored on rechargeable cards cannot exceed EUR 2,500 within one calendar year, and where a maximum of EUR 1,000 can be withdrawn within one calendar year.

477. The application of simplified due diligence also in the case of non face to face transactions in the above mentioned circumstances (section 20.1 exempts not only from the identification requirements set forth in section 12 but also from the requirements provided in the case of non face to face transactions by section 19.2) does not appear to be consistent with the international standard. Such a circumstance, in fact, does not meet the definition of low risk under criteria 5.9 of the Methodology, because non face to face transactions may present specific risks (and as such they are addressed by Recommendation 8) because authorities have not demonstrated these transactions are low risk.

478. According to section 21.1 and 2, the identity requirements do not apply also in the following circumstances:

• a) if the customer is:

  1. one of the financial institutions mentioned in sec. 1(1), nos. 1-11 (with the exception of the financial intermediaries mentioned in the annex 1 of the law) and the Danish Central Bank; or a similar undertaking with its registered office in a country within the European Union or a country with which the Community has entered into an agreement for the financial area covered by the Third Money Laundering Directive, or a similar undertaking established in a country outside the European Union with which the Community has not entered into an agreement for the financial area, subject to requirements to combat money laundering and terrorist financing corresponding to the requirements stipulated in the Third Money Laundering Directive, and if compliance with these requirements is supervised,

  2. an undertaking the securities of which have been admitted to trading on a regulated market, or

  3. a Danish public authority.

• The first exemption from having to obtain proof of identity would not appear to be consistent with the FATF standard. FATF Recommendation 5 requires financial institutions to apply CDD measures, but allows them to determine the extent of this on a risk sensitive basis. Where the risks are low, it allows countries to decide that financial institutions can apply reduced or simplified measures. By exempting financial institutions from having to identify a customer that is a financial institution located in the EU or in a country in which the Community has entered into an agreement for the financial area covered by the Third EU Money Laundering Directive, the authorities are making an implicit judgment that such customers pose a low risk of money laundering and terrorist financing. However, the authorities acknowledged that they had conducted no such risk assessment vis-a-vis such customers, nor had they evaluated whether the countries where such customers are located are in compliance with and have effectively implemented the FATF Recommendations. As such, this exemption does not appear to be consistent with the FATF Recommendation 5.

• b) when the beneficial owner has funds in a client’s account of a lawyer, if the lawyer is subject to regulations set forth in the MLA, upon the condition that information about the identity of the beneficial owner etc. is made available to the account-holding institution when said institution requests this. This exemption does not appear to be in line with the FATF standard or Basel guidance on CDD because it is not limited to the case of “pooled accounts” and seems applicable also in the case of individual owned accounts or sub-accounts. The authorities have indicated an amendment to the provision limiting the exemption to pooled accounts only is expected to be passed by Parliament in the second half of 2006.

479. According to subsection 3 information must always be obtained to ascertain that the customer is covered by the exemptions and the financial institutions are under the obligation to obtain sufficient information to ascertain that the customer is effectively covered by these exemptions. The FSA is granted with the power of exemption concerning other products, transactions or categories of financial institutions on the basis of decisions which might be taken by the European Commission.

480. The previous Act did not provide flexibility to adjust CDD on a risk sensitive basis. Section 12.7 of the new Act allows now the possibility to carry out the identification procedure (requirement of proof of identity, information on purpose of business and regular monitoring of customer relationship) on the basis of a risk assessment, depending on the risk related to the individual customer or business relation, the product or the transaction. In such a situation the financial institution is under the obligation to prove to the relevant MLA supervisory authority the adequacy of its investigation in determining the low risk of ML and FT. The need for guidance by the supervisory authority in the area of risk sensitive basis has been expressed by the interviewed financial institutions.

481. The explanatory notes make clear that even though section 12.7 allows for less a extensive proof of identity of customers on the basis of a risk assessment, it is not possible to use this to omit the obtaining of information on the name, address and CPR number mentioned under 12.2, as well as the information requested in the case of legal persons.

Timing of verification

482. Section 13 of the Act specifies that the identification procedure must be completed in connection with the establishment of the customer relationship and no later than before carrying out the transaction.

483. The MLA provides no possibility for completing the identification process after the required timing, which, in any event, has to take place before any transaction is executed. According to section. 13 of the MLA, provided that this is necessary to not interrupt the normal conduct of business, the identification procedure may, on the basis of a risk assessment, be completed in immediate continuation of the establishment of the customer relationship, in any case “as soon as practicable after the initial contact with the customer”. The explanatory notes clarify that this provision should be interpreted conservatively. This provision can, for example, apply when a customer relationship is established without the customer appearing in person. In such situations the identification procedure should, however, be concluded as fast as possible following the first approach to the bank to establish a customer relationship. The customer relationship should also be such that, on the basis of an assessment of the risk of money laundering and financing of terrorism, it seems reasonable to postpone proof of identity. In any event, as already mentioned, section 13 prohibits the execution of the transaction before the identification procedure has been completed.

484. An exemption is set forth in section 13.3., according to which life-assurance companies and pension funds may carry out proof of identity of the customer after establishment of the customer relationship. In this case, however, the proof of identity is required to take place at or before the time of payout or at the time the beneficiary intends to exercise rights vested under the policy.

485. The previous Act did not provide for any consequence for the failure to comply with the CDD requirements. According to section 13.2 of the new MLA a regular customer relationship or a business relationship must not be established, and transactions must not be carried out for a customer, if proof of identification cannot be carried out in accordance with the identification requirements set forth in sections 12.1-4 (identification obligation when establishing business relations, required identification data; obligation to obtain information on customer’s objective and extent regarding the business relationship). According to the explanatory notes this provision applies irrespective of whether the reason for the lack of information is that the customer refuses to submit the information or whether there are other circumstances.

486. In such circumstance the financial institutions are required to “check” whether a “notification” is to be submitted to the FIU (however within the more stringent standards set forth in section 7, which now requires, for the reporting obligation, that the suspicion refers to an offence punishable by imprisonment of more than 1 year).

487. In the previous Act there was no requirement to apply CDD requirements to existing customers. According to Section 12.8 of the current Act financial institutions “at a suitable time and on the basis of a risk assessment” are now required to “carry out proof of identity” and “collection of information” when the information required by the CDD process “does not exist”.

488. This requirement applies for customer relationships, which were established before the original Act entered into force on 1 July 1993. The requirement also applies for customers which the financial institutions established after 1 July 1993 who have not been subject to the requirements to undertake reasonable steps to ascertain the undertaking’s ownership and control structure and to identify the beneficial owner.

489. The provision states that the identification process of the customers must be carried out at an appropriate time and on the basis of a risk assessment. According to the explanatory notes the reference to the risk assessment means that the risk of money laundering and financing of terrorism should be assessed for the individual customer or for the individual product; whereas the possibility for the identification procedure to be carried out at an appropriate time is meant to allow the financial institutions to integrate the process of identification “as part of the routine operations so that the greater administrative burden arising from the Act is minimized”. The assessment of “at an appropriate time” should be therefore considered in connection with the greater administrative burden imposed by the Act on the undertakings and other persons it covers.

Effectiveness

490. The mission met with a large number and range of financial institutions and their respective associations. While the degree of awareness or concern about the risks of money laundering and terrorist varied from institution to institution, they all appeared to have put in place generally appropriate CDD policies and procedures. Banks appeared to have the most developed policies, procedures and controls. The Danish Bankers Association issued guidelines with respect to the previous MLA that contained extensive explanation of the MLA, guidance on what constitutes acceptable proof of identity for physical persons an different types of legal persons and arrangements, as well as on internet banking. These guidelines have been partially updated to take account of the provisions now in force under the new MLA. Guidelines prepared by other financial sector associations are far less comprehensive. While it is difficult to come to firm conclusion on the effectiveness of implementation of these measures, the FSA has found a higher frequency of non-compliance with CDD requirements than other requirements. That said, and as indicated later in the report, the suspicious transactions reporting regime does not appear to be effective, further improvements in the scope and frequency of inspections are required and there are shortcomings in the sanctions regime. Moreover, the new CDD elements of the law have only recently been introduced. Financial institutions are anxiously awaiting guidance from the FSA regarding the identification of beneficial owners and the risk-based approach generally. As such, it cannot be concluded that the CDD requirements have been effectively implemented.

Additional elements

499. Danish PEPs are covered only to the extent that they reside abroad. Denmark has signed but not yet ratified the UN Convention against Corruption.