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Solberg condemns unethical banking

Prime Minister Erna Solberg lashed out at the potential for corruption and tax evasion in the business world, just as she was gathering a record number of party faithful for her Conservative Party’s annual national meeting this weekend. She had some blunt criticism of Norway’s biggest banks, both of which are caught up in allegations they helped wealthy customers avoid taxes, while new documents revealed how DNB claimed as late as 2014 that it had done no such thing.

Prime Minister Erna Solberg opened the largest annual meeting of her Conservative Party ever on Friday. Before that, she lashed out at "unethical" practices by some of Norway's biggest banks. PHOTO: Høyre
Prime Minister Erna Solberg opened the largest annual meeting of her Conservative Party ever on Friday. Before that, she lashed out at “unethical” practices by some of Norway’s biggest banks. PHOTO: Høyre

“I believe it is unethical for a large Norwegian bank to make it possible (for customers to place assets in brass-plate companies set up in tax havens),” Solberg told newspaper Dagens Næringsliv (DN). “There’s a lot that can be legal but that you still shouldn’t do, if you want to be responsible for your own name and your own reputation.”

The state owns 34 percent of DNB, which was formed after a merger of two other Norwegian banks (DnC and Bergen Bank) that taxpayers bailed out during a bank crisis in the early 1990s. Solberg had been asked what she thought about the documented activity DNB engaged in through its DNB Luxembourg operation, that has catered for years to international and wealthy customers from a base that offers low tax rates and liberal banking and tax regulations.

As newspaper Aftenposten has reported through its involvement in the “Panama Papers” probe, based on documents leaked from the Panama law firm Mossack Fonseca, DNB stands accused of buying shell companies from the law firm that were registered in the Seychelles before the Seychelles toughened up its own disclosure laws. DNB has admitted it should not have engaged in such practices, which allowed customers to stash money in the Seychelles without reporting it tax authorities, even though those practices were not illegal.

“We must learn from this case,” Solberg told DN, conceding that there are flaws within laws and monitoring by state authorities. “I think we’ve been preoccupied with helping developing countries and fighting corruption there, and not good enough at examining ourselves.”

Norwegian authorities have been hit by a wave of corruption cases recently, many of them involving some of Norway’s biggest companies in which the state has large ownership stakes. There’s no question that government officials, no matter which political parties are in power, have been unable to prevent the corruption that’s been found at companies from Yara to Telenor, Hydro and Statoil. While Solberg’s Trade Minister Monica Mæland of the Conservatives is now charged with finding out what’s gone on, much of the banks’ tax haven activity took place while her predecessors from the Labour Party were in power. None of Labour’s four trade ministers during the party’s eight years of holding government power (Odd Eriksen, Dag Terje Andersen, Sylvia Brustad and Trond Giske) stopped DNB from offering services using tax havens. As earlier reported, DNB’s chief executive Rune Bjerke is a former Labour politician himself, and was appointed CEO in 2007, when Labour held government power and continued to for the next six years.

Rune Bjerke, chief executive of Norway's biggest bank, remains cautiously optimistic and confident Norway's economy will withstand current challenges. PHOTO: DNB
DNB’s chief exeutive Rune Bjerke is in hot water over his bank’s questionable operations in tax havens, and calls were rising all week for his resignation.  PHOTO: DNB

Now the chief executives of DNB and Nordea have had to apologize and account for questionable and, in Solberg’s view, “unethical” activities they claim they knew nothing about. One Norwegian researcher, Øyvind Kvalnes at the Norwegian Business School BI, noted this week that it’s a widespread strategy among high-ranking executives to not want to know about questionable company or bank activities. “Then they can say that they didn’t know, when things go wrong,” Kvalnes told Norwegian Broadcasting (NRK).

A professor at BI, Jan Ketil Arnulf, told NRK that the politicians themselves often engage in “double-speak” and arguably can have as much responsibility as the executives, for example when things went wrong at DNB Luxembourg. They don’t pass laws that would forbid setting up the hollow companies formed mostly for tax purposes, arguing that such companies can also have legitimate use, “but then they don’t think folks should do it.” That sends out very mixed signals, Arnulf believes.

On Friday, the embattled state ministry for business and trade responsible for overseeing the state’s corporate investments, published a short statement acknowledging that it had, in 2014, received an explanation from DNB regarding its operations in Luxembourg. The bank, according to the ministry, explained why it had operations in Luxembourg “and expressed, among other things, that DNB Luxembourg did not help customers avoid taxes.”

What to do
Meanwhile Solberg was gathering her party faithful, including her trade minister Mæland who’s left handling all the questions and accusations swirling around partially state-owned businesses like DNB. Solberg’s party was poised to address all sorts of other issues through the weekend as well, with everything from economic restructuring, tax reform, terrorism, immigration and integration on the agenda. The sorts of offshore banking information leaking from the Panama Papers also reveals how terrorism can be financed. Lawmakers are thus under pressure to address the legality of hollow companies set up in lightly regulated tax havens.

Asked what her government can do, Solberg told DN that it was “important to demand even more openness, and we intend to work more closely with the international issues tied to that. It’s more important than ever to ensure that we have good bilateral cooperation and by that I mean good tax agreements and treaties and disclosure requirements (with other countries). We will also work towards forming stricter international regulations, for example through the OECD (Organisation for Economic Cooperation and Development).

“We have also been very clear (about) the importance of fighting corruption within companies, and what the boards of directors’ roles are in following that up,” Solberg concluded. DN reported that DNB did not want to comment on Solberg’s remarks. Berglund



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