When Danske Bank’s Estonian money laundering scandal exploded last autumn, other Nordic banks rushed to reassure investors that they were different. This week’s dramatic events at Swedbank, the Swedish lender that is the biggest bank in the Baltic region, instead show that it is following a similar script to Danske, almost to the word.
Birgitte Bonnesen, who was fired as chief executive by Swedbank’s board on Thursday, was previously head of the Baltic region for the bank, just as was Thomas Borgen, who was ousted as Danske’s CEO in October. Both reached the top in part thanks to the healthy profits the Baltics provided with questions now raised about whether some of that was based on illegal activity.
What started off as a seemingly small affair has rapidly expanded to become one of the biggest money laundering scandals of all time. €200bn of questionable money from Russia and other ex-Soviet countries flowed through Danske’s Estonian branch over a decade while Swedbank had about €135bn of “high-risk non-resident” flows in the same Baltic country, according to Swedish public broadcaster SVT.
Both banks are alleged to have been part of a system that allowed oligarchs and criminals from Russia and elsewhere to move money through their Baltic branches and into the western financial system.
Swedbank is facing questions about its alleged involvement in the Panama Papers and Russian Laundromat money laundering schemes, while Danske has been implicated in the Azeri Laundromat too. Shareholders at both banks have questions about why the boards did not act sooner after such serious allegations. There has also been concern over the actions of Danish and Swedish regulators who both had close links to the two banks. “You would have thought Swedbank would have learnt from the mistakes we made,” said one Danske executive.
Swedbank is now facing multiple regulatory probes just as Danske is. Swedish and Estonian financial supervisors are investigating the scandal. Most worrying for both banks is the interest of US regulators, given their record of imposing hefty fines.
On top of this, the whole Nordic financial and political system is now in the spotlight. Nordic countries have long topped rankings of the least corrupt countries and those with the most amount of trust in society.
Many are worried that this is being undermined by multiple scandals beyond even Danske and Swedbank. “I think the most serious thing here is that trust is so important in the Nordics but it is invisible. I am scared that it has been damaged by the bank in ways we can’t see. We need to take that incredibly seriously,” said one senior Danske official. Anders Karlsson, Swedbank’s acting chief executive, told the annual meeting on Thursday: “Today our trust has been dented . . . We need to focus on rebuilding trust.”
There are specific questions about the clubby nature of banks and their regulators in both countries. Sweden’s top financial regulator Erik Thedéen, head of the Financial Supervisory Authority has recused himself from dealing with Swedbank due to his friendship with one of the bank’s directors.
The former chair of Denmark’s regulator until last May was a former finance director of Danske. The communication style of both banks has been severely criticised, with shareholders querying how seriously the lenders take the allegations months after the scandals broke. Johan Sidenmark, chief executive of pension fund AMF, is one of Swedbank’s largest investors, pointedly told the Swedbank annual meeting: “It’s very important that the board of directors tell us they understand the seriousness of the situation.”
Swedbank’s leadership conceded it might have made communications mistakes having long downplayed that it had any problems with money laundering. “Perhaps we need to explain things in a better way,” said Mr Karlsson.
But just as in the Danske case, there were concerns over whether Swedbank has fully grasped the seriousness of the allegations. There was no apology for the scandal itself from Mr Karlsson, who was chief risk officer at Swedbank from 2013 until 2016, but he said the bank had “overestimated” the knowledge of what money laundering was among the public. “We [banks] cannot stand alone in the fight against this criminality. We need to work together,” he added.
Swedbank chairman Lars Idermark declined to comment on why it had not heeded the lessons from Danske: “Of course, we have discussed that in the board but it’s not possible for me to discuss that just now.” For all their similarities, there is one big difference between Danske and Swedbank. The Swedish bank is a much bigger presence in the Baltics, being the largest bank in Estonia, Latvia and Lithuania.
Regulators in Estonia and Latvia have expressed their concerns that Swedbank and SEB the two remaining Nordic banks present in the region in a big way could be forced to withdraw from their countries due to the fallout.
Mr Karlsson reiterated on Thursday that Swedbank had “no plans to reduce our presence in the Baltics”.
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