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Swedbank rocked by money laundering scandal
During February, SVT’s Uppdrag Granskning claimed that one of the largest banks in Sweden, Swedbank, may have been used for extensive, systematic money laundering for nearly a decade. The show claimed that 50 of Swedbank’s customers had several risk indicators of suspected money laundering and a total of SEK 40 billion was funneled between suspect accounts in Swedbank and Danske Bank in the Baltics. “It’s a massive scandal. From what we’ve learned from SVT’s information, Swedbank’s accommodation of suspicious transactions comprised a significant part of the money laundering operations, in parity with Danske Bank,” says Louise Brown, a corruption expert and chair of Transparency International’s Swedish chapter.
TT reported that the exposé stemmed from previously classified documents that seem to show that Swedbank has had the same type of foreign customers that are suspected of having laundered money through Danske Bank. US finance magnate Bill Browder – the whistleblower in the scandal that exploded last fall surrounding the big Danish bank’s Estonian branch – claimed that SVT’s exposé was simply scratching the surface. He said that he has his own evidence that connects Swedbank to the Danske Bank case, and is demanding that an external investigation.
The show’s claims triggered a wave of action. The Estonian Prosecutor’s Office said that it will investigate Swedbank’s transactions with Danske Bank in Estonia, writes Reuters, putting further pressure on the stock, which fell more than 20% in a week. The Swedish Financial Supervisory Authority (Finansinspektionen, Fi) said that information from the Uppdrag Granskning had confirmed the risk that Swedish banks were being used for money laundering, even though the scope of the suspected transactions in Swedbank’s case appeared to be much smaller than those at Danske. “The information disclosed by SVT is very serious and together with our Estonian colleagues we will thoroughly investigate the matter to make a comprehensive and in-depth assessment,” FI Director Erik Thedeen said in a statement.
However, Fi, itself is also at risk. SvD Näringsliv reported that it had ignored warnings of money laundering in Swedbank. Several internal documents show that Fi did not believe Swedbank or any of the other big Swedish banks could be part of a large-scale money laundering scheme in the Baltics. The Head of Fi’s money laundering unit, Christian Lynne Wandt, is even said to have written on the bank’s internal communications channel that Swedish bank customers were probably not rich enough to launder money on a large scale. He also wrote that FI was more worried about what could happen with the bank’s reputation than actual money laundering, reports SvD Näringsliv, citing sources at Fi.
The Minister for Financial Markets, Per Bolund (MP) said that he was taking money laundering allegations against Swedbank extremely seriously, writes Dagens Industri. He added that confidence in the Swedish banking system risks being undermined. “The system has probably been too toothless,” says Bolund. He argues: “It is of course extremely serious that Swedish banks are named in reports on money laundering and terrorist financing.”
Swedbank appears to have been caught unprepared. Initially, CEO, Birgitte Bonnesen, could not respond directly to questions about the bank’s affairs in the Baltics, saying “We have not been able to look at all the background information so we do not know exactly what they are basing their claims upon,” she told SvD Näringsliv. Bonnesen also said that it was not planned to launch an independent investigation. “We have already today had a range of contacts with external persons and we are not planning any further investigations in addition to this,” she said. This disappointed the market, who wanted to see that the company was treating the allegations with appropriate seriousness. Within a few days Bonneson was forced to backtrack, admitting that it had handled suspicious transactions and appointing accountants, EY to conduct the investigation, Bloomberg reported.
The following week the Swedish Economic Crime Authority (Ekobrottsmyndigheten, EBM) initiated a preliminary investigation into Swedbank, writes DN. The suspicions concern a new incident, the unauthorised disclosure of insider information. Major shareholders had allegedly received prior information from the bank about the suspected money laundering scandal that was about to be revealed. EBM’s preliminary investigation was begun on its own initiative after the authority considered media information. “There are reasons to assume that an unauthorised disclosure of insider information was made to the 15 largest shareholders in Swedbank before the scandal was revealed. The ongoing investigation may reveal what information was provided,” said EBM Chief Prosecutor Thomas Langrot in a press release.
In another disastrous setback, Swedbank then had to replace the auditor, EY, that it had hired just a few days earlier. At the time of EYs appointment, it was already known, that EY was itself subject to investigations in Denmark about alleged money laundering Danske Bank, TT reported. Swedbank wrote in a press release that it “wanted to make sure that the external investigation meets tough demands.”
Investing in Swedbank: “Foolhardy”
With Swedbank’s shares dropping around 25%, some investors viewed it as a golden opportunity to buy. TT reported that Swedbank tops the list over the most bought shares at Nordnet, where the number of customers with Swedbank shares increased by 40% in February. At Avanza, the number of customers who bought Swedbank shares is more than double the amount of those who bought in the second most purchased shares, and the number of shareholders increased by 50% in less than a week. However, Johanna Kull, Savings Economist at Avanza, warns people to be cautious. “This is a foolhardy strategy. Suspicions will continue to cover Swedbank shares like a wet blanket, and the shares’ risk factor has increased significantly,” said Kull.