Since February, leading Swedish bank Swedbank has experienced a spate of adverse media coverage relating to the Danske Bank money-laundering scandal. That coverage built gradually, then surged with particular intensity in the past week, culminating in today’s firing of Swedbank’s Chief Executive Officer, Birgitte Bonnesen:
February: Swedish Television (SVT) reported that “50 of Swedbank’s customers that show several risk indicators of suspected money laundering have funneled a total” of US$5.8 billion through Swedbank.
March 22: Swedbank released the results of a third-party audit, which it had quickly commissioned after the February SVT reporting. The heavily redacted audit report said that Swedbank “has cut ties with an undisclosed number of customers who are at the center of money-laundering allegations” against the bank. Swedbank executives told the Wall Street Journal that the report “shows that the bank has taken the necessary steps to sever relationships with customers deemed suspicious by its internal monitoring systems.”
The immediate public reaction to the audit was highly unfavorable. Investors, government ministers and money laundering experts all criticized the audit report “as insufficient and damaging to confidence in the Swedish lender’s board and management.” The Financial Times reported that “most of the key findings such as how many of the Danske clients were also customers of Swedbank were redacted, leaving investors none the wiser as to how grave the potential money laundering problems at the bank are.”
March 26: The Financial Times reported that according to updated SVT reporting, approximately €135 billion of money flowed “through a Swedbank unit dealing mostly with Russian clients in Estonia over a 10-year period, according to an internal report seen by Swedish public TV.” (FT noted that the €135 billion figure “refers to the gross transactions by the customers — mostly Russians — and not to suspicious money flows.”)
The draft report, by a former deputy chief of Norway’s economic crime authority, referred to “[m]ajor breaches of AML (anti-money laundering) obligations identified in Swedbank Estonia,” and “identified a number of failings including accepting customers posing a high risk of money laundering ‘despite the lack of information regarding beneficial owners, corporate structure, source of funds and the real nature and purpose of the business relationship’.” It also concluded that ““A significant number of the HRNR (high-risk, non-resident) customers should never have been onboarded.”
SVT also reported that in 2016, “Swedbank’s top management withheld information from American investigators about suspicious customers and transactions. In addition, bank transactions show that Donald Trump’s former campaign chairman Paul Manafort received nearly one million dollars in black money through Swedbank.” When SVT confronted her with the information, Bonnesen reportedly replied, “It sounds incredibly strange that we would have had any intention of covering things up. That is not at all consistent with the way we work, or how we’ve done things throughout the years.”
In response to the FT/SVT story, Swedbank stated that it “had made the report ‘available’ to regulators” and to consulting firm Forensic Risk Alliance, which was conducting a review of some of Swedbank’s anti-money laundering efforts. It also said that it “was continuing to conduct a deeper analysis of the information and working with external partners and authorities in investigating the money laundering allegations.”
Swedbank’s response evidently satisfied no one. For example, Swedish pension fund management firm Alecta, which holds a stake of approximately 5 percent in Swedbank, said that “it was not satisfied with the board’s handling of the money-laundering investigation and called on it to increase transparency as soon as possible.” In addition, in advance of Swedbank’s annual general meeting, Alecta and another pension-fund manager, AMF, issued statements ahead of Swedbank’s annual general meeting on 28 March, “calling for significant changes to the board” in the wake of the money laundering scandal.
March 28: Swedbank announced that its Board had fired Bonnesen because of concerns over the continued money-laundering allegations.
Note: In its report on Bonnesen’s firing, The Economist puckishly asked: “One for Wallander [the fictional Swedish detective]?” Scrutiny of Swedbank’s actions during the past month will not require exceptional detective skills to determine that Swedbank and its senior management poorly handled its response to the initial SVT reporting.
The underlying suspected criminal money-laundering, on the other hand, will require sustained and patient investigation. If they have not already done so, the U.S. Department of Justice and the Securities and Exchange Commission, as well as European regulators, are likely to expand their investigations of Danske Bank to include Swedbank. Swedbank, under a new CEO, will need quickly to demonstrate its commitment to full-blown cooperation with authorities and to prompt and thorough remediation.