Swedbank, Sweden's oldest and largest lender, is under investigation by regulators in the United States, Estonia and its home country regarding its involvement in money laundering. It has publicised some of its answers to their questions, spent lavishly on its compliance effort and chosen a new CEO.

The regulators of Sweden and Estonia have asked Swedbank some questions about its AML failures and the bank has answered them, admitting publicly that "many of the key observations made by the two...authorities correspond to the bank’s own conclusions." In the heavily redacted version of its report that it has publicised it gives itself a pat on the back for improving its IT, systems and controls and expelling a few unsavoury clients, while admitting lamely to "certain shortcomings." Using such expressions as 'historical' and 'in the past,' it admits failures in both its Swedish and Estonian operations. It is accused of handling perhaps US$100 billion of suspicious transactions tied to its Baltic operations.

This year's investigations

In February this year, the bank hired the British law firm of Clifford Chance to investigate money-laundering controls, or the absence thereof, in all its offices and subsidiaries. This will cover the years 2007-19 and will look at more than 18 million companies or people registered as customers in the bank's database and US$15.2 billions' worth of transactions. It expects to see the eventual report, with some recommendations for reform, early next year. In April this year, the bank set up a new unit with the dramatic name of Anti-Financial Crime or AFC. It says that this unit is working to identify 'shortcomings' and to render the bank able to prevent all types of financial crime, which makes one wonder about the relevance of its compliance department. In the same month it appointed Biörn Riese as an advisor to the board about the investigations. Further information will emerge in a public report on 23 October.  

Grimstad's investigations
 
In February 2017 Swedbank hired a Norwegian lawyer called Erling Grimstad to help it wave farewell to some highly risky customers at its Estonian branch, where the money laundering allegedly took place. It has now decided to accede to a request from Swedish Economic Crime Authority to waive its attorney-client privilege regarding the Grimstad’s assignments on its behalf. By doing so, it has allowed the agency to interview Grimstad on the subject. Late last year, it gave the lawyer the job of reviewing an internal investigation about its AML efforts in Estonia. In February this year, a news show called Uppdrag Granskning made fresh allegations of money laundering by Swedbank's customers in Estonia. This prompted another wave of government reviews and investigations in Europe (on the part of the Swedish and Estonian regulators, the Swedish and Latvian police and the European Central Bank) and the USA.

New appointments

Meanwhile, the bank's board of directors has appointed Ms Ingrid Harbo as permanent Chief Compliance Officer. She will remain on the Group Executive Committee.
 
Lastly, the bank has made the somewhat controversial announcement that it has appointed Jens Henriksson as its new president and CEO. He will take the job on as soon as possible and will replace Anders Karlsson, the acting CEO who replaced the purged Birgitte Bonnesen on 28 March, when that happens. Karlsson will then go back to being the chief financial officer.
 
Various commentators are criticising Henriksson's appointment because of his implicit involvement in the era of Swedbank's history that Grimstad, AFC, Clifford Chance and the various national authorities are investigating. Until recently he was the president of Folksam, an insurance giant which owns more than 7% of Swedbank. The bank's chairman since 19 June, the Swedish ex-prime minister Göran Persson, put it slightly differently when he praised Henriksson for his "great respect and understanding of Swedbank’s values and heritage.”

Henriksson used to be the CEO of the Stockholm Stock Exchange, Nasdaq OMX, worked at the Swedish Ministry of Finance and also once sat on the board of the International Monetary Fund in Washington. At one time, in 2010, he was the head of banking relations at Swedbank itself.

Financial reports

The progress of the bank's internal investigations will unfold, it says, in future quarterly financial reports. The latest to see the light of day proclaims that the bank has decided to change the dividend pay-out policy from 75% to 50% of annual profits in order to strengthen its capital stocks, partly because of the need to do more AML work.

In the first six months of the year, profits were 2% less than in the same period in 2018, reaching 6,603 million krona (€611 million). Expenses increased to 1,183 million krona (US$109.6 million) because the bank had to pay various consultants to manage the money laundering investigations that are underway and because of severance pay for the outgoing CEO. Elsewhere in the quarterly report it says that expenses for the consultants came to €659 million (US$61 million).

Swedbank is also devoting as-yet undisclosed resources to a know-your-customer platform that will spring from its joint venture with other Nordic banks.