Sweden’s oldest bank offers clearest comments yet on lapses in $135bn dirty money scandal

Richard Milne, Nordic and Baltic Correspondent September 17, 2019

Swedbank has told Swedish and Estonian regulators it still has “shortcomings” in its anti-money laundering work as Sweden’s oldest lender attempts to overcome a $135bn dirty money scandal.

The largest bank in the Baltics released part of its response to a joint Swedish-Estonian investigation on Tuesday, saying it still had problems with know-your-customer and risk-assessment practices in both countries.

Swedbank also admitted it had “not allocated sufficient resources and competence” to combat money laundering; that the division of responsibilities inside the bank was not clear enough; and that it had “not always complied with internal policies”.

The comments are the bank’s clearest yet on what went wrong in a scandal that has cost Swedbank more than a third of its market capitalisation since February as well as the jobs of its chief executive and chairman. It is also facing multiple inquiries by US regulators, first revealed by the Financial Times, that investors fear could lead to large fines.

About €135bn of “high-risk, non-resident” money flowed through Swedbank’s Estonian operations over a decade, according to an internal report seen by Swedish public broadcaster SVT. Publicly, Swedbank has only released a heavily redacted report that merely looked at its links to a €200bn money-laundering scandal at Danske Bank, Denmark’s largest lender. Swedbank’s board, which since June has been headed by former Swedish prime minister Goran Persson, reversed a previous decision on Monday night and agreed to hand over an internal report to local prosecutors. The bank raised eyebrows in March by engaging in a war of words with Sweden’s prosecutor for financial matters, saying his comments that no company had ever refused to hand over documents were “incomprehensible”.

Swedbank and its advisers had argued that the report, which was by a Norwegian lawyer, was covered by attorney-client privilege but it has agreed to waive that and hand it over. In its statement on Tuesday Swedbank said it was “hard at work to ensure regulatory compliance going forward”, and that it would give more information when it reports third-quarter results in late October.

The bank added that a report by law firm Clifford Chance into its historical shortcomings should be finished early next year. The UK-based law firm will also make recommendations on meeting “industry best practices and regulatory expectation”. Swedbank said many of the observations made by the Swedish and Estonian regulators were similar to its own conclusions and underscored that it had recently improved its processes as well as ended relationships with customers who do not meet its policies or regulatory requirements. Shares in Swedbank were down 2 per cent to SKr139 on Tuesday morning.

https://www.ft.com/content/c10076e2-d920-11e9-8f9b-77216ebe1f17