At the same time, the bank noted that the conclusions of the bank supervisors in Sweden and Estonia on historical weaknesses in Swedbank’s internal control systems and management are in line with the bank’s own findings, and that Swedbank will pay a fine of 360 million euros imposed by the Swedish regulator.
Regulators in Sweden and Estonia have required the bank to further improve its capacity to assess, identify and analyze risks of money laundering and terrorist financing, as well as to improve its organizational structure and increase its resources.
An investigation in Sweden found that Swedbank had serious shortcomings in managing the risk of money laundering in its Baltic branches. The Bank’s awareness of the risk of money laundering and its processes, methods and control systems was insufficient. The Baltic operations also lacked adequate resources to combat money laundering, the inspection said.
The investigation shows that Swedbank was aware of possible money laundering activities in the Baltic States. Despite several internal and external reports warning of deficiencies in the Baltic branches and the risk of money laundering, the bank did not take appropriate action. The inspection also revealed a number of cases where the bank did not provide the inspection with documentation and information, which in retrospect revealed the seriousness of the situation, the inspection said.
The Estonian investigation concluded that the bank’s Estonian branch had significant deficiencies in its money laundering risk control systems and that the bank had not complied with the anti-money laundering requirements.
In Sweden, an investigation into Swedbank’s money laundering risk management in its Baltic operations was launched in April 2019 and covered the period from 2015 to the first quarter of 2019.
The Inspectorate points out that the penalty imposed on the bank does not endanger its current business or customers. The bank is well capitalized and has a good liquidity ratio.
The Bank noted that in both countries, Swedbank’s regulatory requirements will be implemented within the set deadlines.
The management of the Swedbank Group has confirmed that the bank will continue to operate and develop in four key markets – Latvia, Lithuania, Estonia and Sweden.
Jānis Krops, Head of Media Relations at Swedbank Latvia, pointed out that Swedbank’s work in Latvia is not affected by these findings, as the Financial and Capital Market Commission (FCMC) performed such an inspection already in 2016.
Swedbank has previously acknowledged that it had deficiencies in its internal control systems that allowed fraudulent customers to use the banking system for illegal activities until 2016. The Latvian banking supervisor – the FCMC – performed a similar inspection in Latvia in 2016, as a result of which “The bank paid an administrative fine of 1.4 million euros and made extensive improvements in its work against financial crime,” he said.
At the same time, the FCMC noted that the commission worked closely with the Swedish and Baltic supervisors, providing the information at its disposal, including the previous FCMC inspection of Swedbank, which ended with a fine of 1.4 million euros in 2016 and the obligation to improve internal control system.
“In addition, it is important to emphasize that Latvia is the only region in the country that identified deficiencies and imposed penalties on this bank several years ago, while in other countries in the region inspections for several years are taking place in recent years,” said the FCMC.
The commission also noted that in 2016 the FCMC, when determining the amount of applicable fines, took into account that Latvian Swedbank had voluntarily started to make improvements to eliminate shortcomings and improve the internal control system in the field of money laundering and terrorist financing prevention, including strengthening the bank’s compliance control function, which includes increasing the capacity of employees and improving information technology solutions.
The agreement also included that Swedbank had decided to completely suspend the provision of financial services to those foreign customers that pose a disproportionately high risk to the bank in the field of money laundering and terrorist financing prevention.
The administrative agreement between the FCMC and Swedbank also provided for further measures, which the bank undertook to fully implement within the set deadlines, in order to improve the internal control system for the prevention of money laundering and terrorist financing and strengthen its operational efficiency. These measures were fully implemented under the supervision of the FCMC, the FCMC emphasized.
The FCMC also noted that the supervisory work is continuing all this time and the FCMC is in contact with both Swedbank and the supervisors of Sweden and the Baltic States, all information received is carefully evaluated and further necessary supervisory measures are decided.
“The decisions of the Swedish and Estonian supervisory authorities do not affect Swedbank’s customers in Latvia, the bank works on a daily basis,” the commission said.
It has already been reported that Swedish public television SVT has reported suspicions of large-scale and systematic suspicious transfers between Danske Bank and Swedbank’s Baltic divisions between 2007 and 2015, amounting to at least SEK 40 billion ( EUR 3.7 billion).