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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.”
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.
Finance Ministry demands explanation from FI
The Financial Supervisory Authority (FI) experts had warned FI’s management of concerns about Swedbank already in 2017, but that FI’s management had chosen not to act. FI’s Director General, Erik Thedéen, was summoned to a meeting at the Ministry for Finance. State Secretary, Ulf Holm, told Bloomberg that the government takes the accusations against Swedbank “very seriously”, and that Erik Thedéen must “give an explanation for recent events”. The State Secretary also mentioned that FI received extra funding last year to more closely scrutinise the flow of cash. The results of the increased measures were to be reported to the government in November.
Tarnishing the Nordic reputation
The Economist wrote that public opinion sentiment about capitalism is souring due to the scandals that shake corporate and financial firms. “Cuddly “stakeholder”” capitalist Sweden is no exception, according to the magazine.
The FT wrote that the scandals tarnish Nordic reputation: In the 1990s and 2000s, Nordic banks began to take root in the Baltic countries because it seemed a perfect opportunity to establish lucrative new business. “Seen as the great frontier,” in the words of a Nordic banker, lenders including Danske Bank, Swedbank, SEB, Nordea and DNB controlled almost all domestic banking in the Baltics. The Baltic countries were simultaneously positioning themselves as financial bridges between Russia and the EU. “It was a market where we would be able to provide some order and help the Russian middle class,” the banker told The Financial Times. The very same business has now become a career-ending embarrassment as an extraordinary money-laundering scandal involving Russian and other ex-Soviet oligarchs and criminals has slowly been revealed. Not only are the revelations damaging Nordic banks and their regulators but also hurting the reputations of entire countries.
Swedbank April Events
During April Swedbank began to get a grip on the crisis that it found itself in, moving from “deer in the headlights” mode that it found itself in towards a state where it was managing the issues. This was traumatic for the firm, as in the process it lost its CEO and Chairman.
- April 2: Swedbank announced management changes in a press release. The current corporate strategy chief, Mikael Björknert, was tasked to work with Swedish banking businesses. The area is the bank’s largest, Dagens industri wrote. Niclas Olsson will head corporate finance. But changes to management might not be sufficient. Estonian authorities have dispatched its staff to inspect Swedbank’s main office in Tallinn. A spokesperson from Estonian authorities confirm to ERR News that on-site inspections have begun, something that Swedbank confirms.
- April 5: Swedbank’s Chairman, Lars Idermark, resigned from his post as Chairman, with immediate effect, according to press release. The current Deputy-Chairperson, Ulrika Francke, has taken over the role of Chair. Idermark commented in the press release: “After the recent strong debate on Swedbank and the issue of the bank’s handling of suspected money laundering in the Baltic countries, I have found that the mass media attention that this created is not compatible with my CEO’s assignment in the forestry group, Södra. Therefore, I have come to the conclusion that the best decision is that I leave the assignment as chairman of Swedbank with immediate effect. It has been difficult in the mass-media uproar to get hearing for proportions, issues of fact and being able to respond to direct errors. Added to this is the protection of bank secrecy and the laws and regulations that a bank has to follow in the markets where it operates. This makes the communication aspect extra challenging. Idermark further noted that he had been asked to take-on the role of Chair on two separate occasions, which he had done out of a sense of duty.”
- April 10: The European Central Bank (ECB) announced that it was investigating Swedbank’s Estonian operations, reports DN Ekonomi. According to a source quoted by the newspaper, the ECB wants to know how well the bank’s Estonian subsidiary got to know the bank’s customers. Furthermore, the ECB will likely investigate how risk-evaluation has been managed in the bank. The Swedish Financial Supervisory Authority confirmed for DN that it has handed over the so-called Grimstad Report to the ECB. The report is a review of suspect transactions and accounts in the bank’s Estonian operations. “One should not over-dramatise the affair, but in the end, the ECB probably has the ability to encourage the bank to replace certain people,” said Carl Hamilton, Professor of Economics.
- April 24: The Swedish Economic Crime Authority (Ekobrottsmyndigheten, EBM) raided Swedbank’s headquarters in Sundbyberg, in Stockholm, one of the bank’s lawyers confirmed to Dagens industri. The raid emerges after a dispute when the bank was unwilling to hand over the so-called Grimstad report – a report that was compiled by Norwegian lawyer, Erling Grimstad, in which he details the extent of Swedbank’s Baltic money-laundering services. The newspaper adds that new suspicions against the bank have not emerged.
- April 25: The scandal-shaken Swedbank has announced that it is overhauling its anti-money laundering (AML) services as it released its latest quarterly report, in which its soaring profits were detailed. The new department, coined as the Anti-Financial Crime unit, will be dedicated to counter money-laundering, measures against financing terrorism, frauds, cyber and data security, as well as physical security, the bank said. Swedbank’s board has moreover recruited external advisors, including the international law firm Clifford Chance, who will support ongoing investigations on money-laundering.
- April 28: Swedbank’s Nomination Committee has suggested former Social Democratic PM, Göran Persson, become the new Chairperson of the Swedbank board, according to a press release. “Göran has an impressive merit list, a broad international network and an experience in financial operations,” said the Chairperson of the Election Committee, Lennart Haglund.
- April 29: The former Social Democratic Prime Minister, Göran Persson, has accepted the offer to become the new Chairperson of the Swedbank Board. Lennart Haglund, Chairperson of the Swedbank Election Committee, confirmed this for Sveriges Radio.