In public comments on March 23, 2020, Swedbank AB addressed the findings of a report issued by the law firm Clifford Chance, which was retained by the bank in February 2019 to investigate its historical exposure to money laundering and sanctions risk.
The focus of the investigation was Swedbank’s Baltic banking businesses in Sweden, Estonia, Latvia and Lithuania. The 218 page report covers the period between January 2007 and March 2019. Although falling short of declaring that Swedbank had engaged in money laundering or processed customer transactions involving the proceeds of crime, the report concludes that the bank had inadequate systems and controls to ensure AML and sanctions compliance in light of the risk of its customer base. The report identified Estonia as the highest risk market, and noted that until 2016, high risk customers were pursued by the bank as part of its business strategy. According to the report, the bank approved high risk customers without complete documentation regarding beneficial owners, accepted customers despite actual knowledge that the listed owners were not the true beneficial owners, ignored red flags indicating potentially suspicious transactions, and maintained some beneficial owner information outside of the regular customer database in order to protect the owners from detection.
The investigation also examined potential non-compliance by Swedbank’s Baltic subsidiaries with US sanctions regulations issued by the Office of Foreign Assets Control of the US Department of the Treasury. The report concluded that for the five year period between March 2014 and March 2019, the bank’s Estonia and Latvia branches processed millions of dollars of transactions involving persons in Iran, Cuba, and Crimea; however, none of these transactions involved persons listed by OFAC.
The report also revealed deficiencies in Swedbank’s governance, in particular in terms of the bank’s failure to establish clear lines of AML responsibilities, and its failure to appreciate the severe risk posed by the high risk business in the Baltic countries.
In terms of accountability, the report found that the CEO who served between 2009 and 2016 failed to focus on AML deficiencies despite institutional warnings, and that the CEO who served from 2016 to 2019 did not direct sufficient resources or urgency to the remediation of AML issues, but did take some measures to reduce risk in the high risk non-resident business in the Baltic subsidiaries, and to launch investigations of potential AML exposure. With regard to the 2016-2019 CEO, Swedbank issued a press statement saying that, “Given the information in the investigations….the Board of Swedbank has decided to unilaterally cancel the agreement of severance pay to the bank’s previous CEO Birgitte Bonnesen.” The bank added that it would, however, not make claims against the former CEO.
Swedbank also announced that its board had decided to accept the decision of the Finansinspektionens (the Swedish Financial Supervisory Authority) to impose an administrative fine of SEK 4 billion (approximately US $392 million). The bank reports that it remains under investigation by authorities in the United States, Sweden, and several Baltic countries.
Swedbank press release (report) | Swedbank press release (severance to CEO) | Clifford Chance report