Scandinavians Stunned over Region’s Growing Money Laundering Allegations

By Amanda Billner and Love Liman | February 22, 2019

Scandinavians are taking a hard look at their institutions as allegations of systematic money laundering rock the entire region.

With Swedbank AB becoming the latest lender to get dragged into a dirty money scandal that’s already engulfed Danske Bank A/S, those at the top of Sweden’s financial establishment are speaking out.

Hans Lindblad, the director general of the Swedish National Debt Office, says the financial industry now risks losing the trust of the people. He says the consequences of that would be dire for the whole economy.

Misgivings about Nordic banks have already wiped billions of dollars off their market values, with lenders in the region dragging down the entire European banking sector on Thursday.

As the investigations pile up, a picture is emerging of a laundering pipeline that allowed crooks in the former Soviet Union to channel their money into the West with the help of Nordic and Baltic banks. The amounts involved are vast, and point to what may be the biggest dirty money scandal ever.

‘Dishonest Behavior’

“I have to say that the serial greed that over and over again pops up in the form of suspicion of dishonest and greedy behavior has to be stopped,” Lindblad said in an interview in Stockholm. His office is responsible for bank resolution and restructuring in Sweden and would have to handle the fallout if a lender fails.

“Banks are in the confidence business and only the suspicion of being involved in money laundering damages confidence in the banks,” Lindblad said. “The stability of the banking sector may weaken if confidence in them is damaged.”

Swedbank, which until this week had vehemently rejected any suggestion that it was involved in the laundering scandal surrounding Danske, acknowledged on Wednesday that it also handled suspicious transactions. Those have been reported to the police, it said.

‘Just the Beginning’

The comments followed a report by SVT, the main Swedish broadcaster, which alleged that Swedbank was behind about 40 billion kronor ($4.3 billion) in illicit flows linked to Danske. Bill Browder, an investor who’s made a career of chasing money launderers, said he also has evidence linking Swedbank to the Danske laundering case, and warned that the figures reported by SVT are likely to be “just the beginning.”

Browder, who was instrumental in bringing lawsuits against Danske, says he’s planning to file a criminal complaint against Swedbank.

Investors responded to the explosion of bad news by dumping Swedbank’s shares. It sank 14 percent the day the allegations were made public, and almost 10 percent the following day, after Chief Executive Officer Birgitte Bonnesen failed to reassure markets during a conference call with analysts.

According to Browder, he has evidence suggesting that “a good part of the Nordic banking system has been used by Russian money launderers, and neither the regulators nor the banks did anything about it for many years.” Others seem to agree, and the European Banking Authority is now conducting a formal investigation into the financial supervisors in Denmark and Estonia.

For Lindblad, the concern now is that the potential loss of trust in the financial system could become systemic.

“Banks are in the confidence business and if they lose the market’s confidence, then they lose their source of financing and that could put them in a difficult situation,” he said. “This isn’t just any business.”

He said those running the institutions suspected of wrongdoing bear a great deal of responsibility, given the fallout of their decisions.

The Managers

“It’s a handful of people who are in the bank management teams and their decisions can affect the economy of a nation and sometimes even of a whole continent,” he said.

At Danske Bank, the board was quick to purge its upper ranks after conducting an internal review that revealed the vast scope of the scandal. Much of about $230 billion that flowed through a tiny branch in Estonia between 2007 and 2015 was probably suspicious in origin, the bank said. It got rid of its CEO and chairman, as well as several other managers associated with the scandal.

At Swedbank, Swedish media have speculated as to whether Bonnesen can stay. For now, she says she doesn’t understand the question.

Lindblad says that the question of “how to stop this kind of behavior is for other authorities to deal with. But agencies tasked with ensuring stability must jointly address this.”


Was this article valuable?

Here are more articles you may enjoy.