Banks, EU – Baltic States, Financial Services, Legislation

The bank's representatives indicated that the Swedish and Estonian financial supervision authorities' findings about historical shortcomings in Swedbank's internal control systems and management are consistent with the bank's earlier conclusions and that Swedbank will pay the EUR 360 mln fine imposed by the Swedish regulator. 

The Estonian Financial Supervision Authority (FSA) has issued a precept to Swedbank AS to take measures to improve its anti-money laundering risk control systems since they have not been in line with anti-money laundering requirements. A criminal investigation in Estonia will determine whether money laundering or other criminal acts have taken place.

The Swedish investigation concludes that Swedbank AB has had large deficiencies in its governance of anti-money laundering measures in its Baltic subsidiaries. The bank's awareness of the risk of money laundering and its processes, routines and control systems were insufficient. The Baltic operations were also lacking adequate resources to combat money laundering.

The investigation shows that Swedbank AB has been aware of suspected money laundering activities in the Baltics. Despite several internal and external reports warning about deficiencies in the Baltic subsidiaries and the risk of money laundering, the bank did not take proper and sufficient action. The Swedish FSA also found a number of examples of how the bank withheld documentation and information from the FSA that in retrospect reveal the seriousness of the situation. The Estonian FSA made the same discovery in the course of its investigation.

"Our investigation shows that the Swedish management did not efficiently address the risk of money laundering in the Baltics," Erik Thedeen, director general of the Swedish FSA, said. "It is also deeply concerning that the bank on a number of occasions withheld information from the FSA that would have revealed the seriousness and scope of the problems."

The Swedish FSA has also investigated how Swedbank AB's Swedish operations adhered to anti-money laundering requirements. The investigation concludes that the bank has had deficiencies in its risk classification of customers and its transaction monitoring. The authority therefore concludes that the bank has not lived up to the anti-money laundering requirements in its Swedish operations.

On the basis of findings in both investigations, the Swedish FSA has decided that Swedbank AB should receive a warning and an administrative fine of four billion Swedish kronor. In the assessment of the Swedish and Estonian FSAs, the sanctions and the precept imposed on Swedbank will not jeopardize the bank’s current business or customers. The bank is well capitalized and has a good liquidity ratio.

The Estonian investigation concludes that the Estonian subsidiary has had severe deficiencies in its anti-money laundering risk control systems and that the bank failed to live up to the anti-money laundering requirements.

“Swedbank has not invested enough in preventative measures to combat money laundering risks," Kilvar Kessler, head of the Estonian FSA, said. "The banking group made choices that allowed it to service higher risk clients without proper anti-money laundering systems and controls and without knowing to the fullest extent the money laundering risks posed from servicing these clients," he added.

The Estonian authority has therefore issued a precept that obliges Swedbank AS to take comprehensive measures to properly understand and mitigate the risks it faced in the past and those it faces now. Swedbank AS must also review and amend its organizational framework to manage risks more effectively. The bank needs to change its practices in understanding the activities of its clients and to review practices for reporting suspicious transactions to the Financial Intelligence Unit and operational risk to the FSA. The FSA also found a number of examples of how the Estonian subsidiary has withheld information that in retrospect reveal the severity of the problems in the bank.

The issue of whether money laundering or other criminal acts took place in the bank are currently being investigated by the Estonian prosecutor's office. As in many other countries, double jeopardy is not permitted in Estonia, and therefore the Estonian FSA terminated its own misdemeanor investigation into Swedbank AS in November 2019 to allow the prosecutor's office to continue with its criminal investigation.