Question

1) How did Wells Danske Bank’s Estonian Branch money laundering activities violate the duties they owed to consumers, regulators, and employees?

2)  What are the ethical issues of this case? How would you describe Chipotle’s handling of the food safety crisis? What might Chipotle management team have done differently? What is the role for the Center for Disease Control (CDC) in food safety situation? How did they help or hurt Chipotle in managing the crisis?

Answer 1

1. In the spring 2007, the Estonian FSA (EFSA) carried out an inspection at Sampo Pank in Estonia, focusing on the bank’s non-resident customers. The division of responsibilities between the Danish FSA (DFSA) and the EFSA with regard to Danske Bank’s branch in Estonia follows from EU legislation. As the host country supervisor, the EFSA is responsible for the AML supervision of the Estonian branch. Suspicious transactions and activities must be reported to the Estonian Financial Intelligence Unit[29] (“FIU”) who then forwards them to the police and other authorities for further investigation and prosecution. As the home country supervisor of Danske Bank, the DFSA is responsible for monitoring that the Group has sufficient capital and liquidity, and for supervising the Group’s overall governance of its activities. The DFSA is also responsible for the AML supervision of Danske Bank’s Danish activities.

The EFSA’s final inspection report, written in Estonian, was issued on August 16, 2007. On September 20, 2007, the branch sent an English translation of the report’s summary to Danske Bank’s Group Compliance & AML in Copenhagen, which shared it with Group Legal.

Danske Bank states Estonian branch may have laundered $230 billion, CEO steps down

Denmark’s largest bank admitted that a Northern European branch has potentially laundered hundreds of billions of dollars in a widening financial crime probe that has risen larger each month, with the latest twist being that the head of the entire bank has stepped down in disgrace. When a whistle-blower alleged that employees of a branch of the Danish lender Danske Bank had been knowingly working with customers who had broken the law, it was not the first time that questions had been raised about that particular office. It would not be the last. Danske Bank said on Wednesday that its headquarters and its Estonian branch failed for years to prevent suspected money laundering involving thousands of customers.

The lender said it was unable to estimate the total amount of the suspicious transactions, but its nonresident operation in the Baltic nation improbably had total flows of 200 billion euros, or $234 billion — nearly equivalent to the size of the Danish economy. The chief executive, who had previously headed the bank’s international operations, quickly said he would resign. In an 87-page report commissioned and paid for by Danske Bank, a Danish law firm, Bruun & Hjejle, found that misconduct took place at the lender’s Estonian branch from 2007 to 2015, involving “objectionable” omissions, inaction and faulty processes at all levels of the bank. That meant the lender “was not sufficiently effective in preventing the branch in Estonia from being used for money laundering,

2. An inspection by a local health department last week found that the restaurant was not keeping its lettuce and beans at proper temperatures, according to Business Insider. It is unclear if this was the cause of the reported illnesses, which included symptoms like vomiting, nausea and fever.

Food poisoning expert Bill Marler told CNBC that the outbreak "looks like norovirus."

Chipotle is by no means the only restaurant to face food safety issues. McDonald's recently recalled salads at about 3,000 of its U.S. restaurants due to an outbreak of cyclosporiasis tied back to lettuce tainted by the cyclospora parasites, which is transmitted in fecal matter.

The Centers for Disease Control and Prevention said it has traced at least 163 cases across 10 states back to McDonald's. The company said all of the locations have been resupplied from a different vendor.

Role and Duties challenges

• Changes in our food production and supply, including more central processing and widespread distribution, and many imported foods.
• New and emerging bacteria, toxins, and antibiotic resistance.
• Unexpected sources of foodborne illness, such as flour and meal replacement shake mixes.

Chipotle's situation could be worse. In 1993, for example, hundreds of people were sickened — and four children died — as a result of a massive E. coli outbreak caused by undercooked hamburgers at the fast-food restaurant Jack in the Box. Jack in the Box survived the crisis, instituting innovative new food safety procedures and running ads showing it dynamiting the company's corporate headquarters.

Chipotle is going to have the pursue the same two-pronged strategy: First make sure it's identified and fixed the problems that allowed the outbreaks in the first place, and then make sure the public knows that Chipotle has turned over a new leaf when it comes to food safety.