Investors are concerned over the involvement of U.S. authorities. A U.S. sanction on the bank could significantly hamper its ability to transact in the U.S. dollar.
On Thursday, in a significant development that adds pressure to the business environment in the Baltics, Swedbank has admitted to money laundering charges and over its failure in combating money laundering in the region. It is now facing investigations in the United States over its Baltic business.
The CEO and chairman of Swedbank, Sweden’s oldest bank, have both left the bank even as money laundering allegations have snowballed. It is now facing a joint probe by financial watchdogs in Sweden and the Baltics and another by Sweden’s economic crimes body.
Swedbank is caught up in a huge regional money laundering scandal originating with Danske Bank through which nearly $223 billion (200 billion euros) of suspicious funds have been routed between 2007 and 2015.
According to a report from Swedish broadcaster SVT, Swedbank had processed gross transactions worth up to 20 billion euros a year from high-risk, non-resident clients, mostly Russian, through its Estonian branch from 2010 to 2016.
In February 2019, following the resurfacing of allegations of failure to check money laundering, Swedbank had said, it had faith in its anti-money laundering procedures and that suspicious transactions were identified and reported to authorities.
However, in March, acting CEO Anders Karlsson, who took charge at the bank towards the end of March, stated previous internal investigations indicate shortcomings.
He cited reports of certain customers identified in previous money-laundering cases not being flagged, weaknesses in know-your-customer procedures and a lack of reports to the authorities on some suspicious transactions.
“For Swedbank to deserve the trust of customers, authorities, investors, employees and other stakeholders, continuous improvement in our anti-money laundering work is required,” said Karlsson.
According to its first quarter report, Swedbank incurred 4.52 billion Swedish crowns towards expenses incurred to deal with the money laundering allegations and the severance paid to its CEO Birgitte Bonnesen. It has also forecast an additional spending of 1 billion for 2019 and has earmarked 650 million towards strengthening its anti-money laundering systems, said Karlsson.
The involvement by U.S. authorities is a key investor concern since sanctions against the bank can block Swedbank’s ability to transact in USDs.