Regulatory Arbitrage and Compliance Manipulation: Lessons from Wirecard, FTX, and Danske Bank

• In Event: Euroc: Crimes and regulation in the financial and cryptocurrency markets

Abstract

Financial criminals systematically assess risk and exploit regulatory gaps. Wirecard, FTX, and Danske Bank all strategically operated across jurisdictions, leveraging regulatory arbitrage to sustain illicit financial flows. Danske Bank routed billions in suspicious transactions through its Estonian branch, taking advantage of discrepancies in Nordic-Baltic financial oversight. Wirecard built an illusion of legitimacy by presenting itself as Germany’s fintech champion while siphoning money through subsidiaries in Asia. FTX escaped stricter U.S. financial regulations by incorporating in the Bahamas, enabling unchecked internal fund movements.
Applying a comparative case study approach, this study examines how financial criminals exploit jurisdictional loopholes to sustain money laundering. Through a compliance risk-mapping framework, it identifies enforcement blind spots, including regulatory delays, fragmented oversight, and AML inconsistencies. The findings reveal that financial criminals do not merely evade compliance but manipulate it—leveraging legal fragmentation, procedural loopholes, and use political influence to prolong fraudulent activity.
Building on neutralization and opportunity theory, this paper explores how corporate actors justify illicit behaviour and sustain fraud through strategic regulatory exploitation. Wirecard discredited whistleblowers to maintain investor confidence, FTX lobbied against crypto regulation while misusing customer funds, and Danske Bank leveraged risk-based AML exemptions to facilitate illicit transactions.
Despite clear warning signs, these schemes remained unchecked. Countering this requires stronger international cooperation, real-time intelligence sharing, and predictive AML risk models—such as FINTRAC’s AI-driven scorecard system—to anticipate enforcement gaps before criminals exploit them. A comprehensive approach must address financial crime as both an opportunistic strategy and a systemic failure, demanding more adaptive and coordinated regulatory responses.

Author

• Monika Lewko, Kozminski University