Update: Europe’s Dirty Money Could Total $1 Trillion, Says Anti-Corruption Investor Browder

By and | March 7, 2019

Bill Browder, the investor who’s made a career of chasing money launderers, says the cases he’s brought against banks so far only represent a tiny fraction of the full amount in dirty money trying to get out of Russia and into the West.

The Hermitage Capital Management co-founder, who says he has worked closely with law enforcement agencies across Europe, estimates that roughly $1 trillion in questionable funds from the East are either already inside the European Union or looking for loopholes to get in.

“Our investigation continues to lead to new evidence and new information and new suspicious transactions,” Browder said in an interview with Bloomberg Television’s Guy Johnson. “And as long as it does, we will take that evidence and follow that evidence where it leads.”

Browder this week filed his latest criminal complaint against a Nordic bank, alleging that Swedbank AB handled $176 million connected to the death of Sergei Magnitsky. Sweden’s Economic Crime Authority has confirmed receipt of the complaint, which is dated March 4, and says it’s now looking into the claims.

Browder’s complaint follows separate allegations that tie Swedbank to almost $6 billion in suspicious transactions.

Browder alleges that for years, criminals from the former Soviet Union turned to the Baltic units of Nordic banks to launder their money, enabling them to pay for Western luxuries such as private schools for their kids and expensive homes. Browder has previously filed complaints against Danske Bank A/S, which is now being investigated in the U.S. for its role at the center of a $230 billion laundering scandal stemming from its Estonian branch.

Browder says the amounts linked to Danske only represent “one-quarter of the estimated flight capital” from Russia.

The Swedbank Case

Browder says that the “suspicious transactions went on for nearly a decade with no one stopping them.”

“The transactions were obvious to us from the outside so it’s hard to imagine that they weren’t obvious from the inside of the bank. Unless there are real legal consequences for money laundering, these problems will continue,” he said.

Swedbank spokesman Gabriel Francke Rodau said in an emailed comment on Thursday, “We have, as far as we know, not yet been able to see the notification’s content or details. Therefore we have difficulty in giving a comment on this. In all of the cases when authorities start investigations, we always cooperate fully, and we see positively on all investigations.”

Browder is asking prosecutors to include Nordea Bank Abp, the Nordic region’s biggest lender, in their investigation of Swedbank. He’s also calling for the creation of an international team to ensure an “effective investigation,” as the case balloons to include banks across the rest of Europe.

Regulators in Sweden and Estonia started investigating Swedbank last month following media reports linking it to the Danske case. Browder is chasing all banks he says played a part in enabling a $230 million tax-fraud scheme. Magnitsky, Browder’s lawyer, died in a Russian prison in 2009 after trying to bring the perpetrators in that case to justice.

Joakim Bornold, a savings adviser at Soderberg & Partners in Stockholm, said the criminal complaint represents a “real blow” to investors’ ability to have confidence in Swedbank. He also criticized a decision by management to prevent employees from using a whistle-blower channel set up by Sweden’s main broadcaster, SVT. The move makes Swedbank “appear more like a bank from the old Soviet regime,” Bornold said.

Red Flags

According to the complaint, which was also filed to the Swedish government and police, the signs of money laundering were hard to miss. Browder points to the location of corporate account holders in countries such as the British Virgin Islands and the Marshall Islands. Meanwhile, others registered in the U.K. “appear to have filed zero or no financial returns” even as they did transactions of “substantial dollar amounts” via their Swedbank accounts, he said.

Swedbank employees “failed to block and report suspicious transactions with multiple suspicious counterparties in large amounts, thereby facilitating the illegal activity,” the complaint alleges.

“Red flags were obvious” in a number of cases, raising suspicions that employees may have actively assisted clients in laundering money, according to the document.

Swedbank, which dominates the Baltic region’s financial markets, has been forced to backtrack on its earlier insistence that it wasn’t involved in the Danske case. Danske took over the Tallinn-based operations at the center of the scandal as part of a bigger deal with Sampo Oyj of Finland in 2007. Before Sampo, the unit was majority owned by the Estonian central bank.

Viktor Yanukovych

Swedbank’s U-turn followed a Feb. 20 report by Sweden’s main broadcaster, SVT, alleging the bank had misled the public about its Baltic dealings. SVT says Swedbank provided services to Russian oligarchs and deposed Ukraine President Viktor Yanukovych, among others.

Swedbank has since acknowledged it handled suspicious transactions, which have been reported to the police. The bank has declined to comment on individual clients or transactions.

Sweden’s FSA said on Wednesday that the picture emerging “confirms clearly that there have been deficiencies in the anti-money laundering work at Swedish banks’ Baltic operations, but it also indicates that these deficiencies mainly lie a few years back in time.” Commenting specifically on allegations in Swedish media against Swedbank, the FSA said there appear to “have been serious deficiencies” in the lender’s controls against laundering.

The development has put pressure on Chief Executive Officer Birgitte Bonnesen, who ran Swedbank’s Baltic business from 2011 until 2014. For now, the board has given Bonnesen its backing, but some investors have criticized management’s handling of the case.

Meanwhile, the Swedish Economic Crime Authority has started a separate probe to find out whether Swedbank broke insider information rules, after it gave its biggest shareholders advance warning that SVT was planning to publish a report. The bank has denied wrongdoing.

Since the allegations first surfaced on Feb. 20, Swedbank has lost almost a fifth of its market value, equivalent to about $5 billion. By comparison, Danske’s scandal has cost it almost 50 percent in lost market value over the past year, equivalent to roughly $17 billion.

The allegations:
  • 77 Swedbank Baltic accounts received $18 million from 13 Danske Estonian accounts
  • The biggest share of the $176 million in transactions was tied to Ukio Bank, a Lithuanian bank that was declared bankrupt in 2013
  • 590 Swedbank accounts in the Baltics and Sweden received $158 million from 102 Ukio accounts
  • 50 Swedbank accounts in Sweden received around $2.4 million from 31 Ukio accounts opened by shell companies located in Belize and the British Virgin Islands.
  • The money flowed in both directions: 91 Swedbank accounts held by individuals and businesses sent $92 million to 46 Ukio accounts.

–With assistance from Ott Ummelas, Niclas Rolander and Hanna Hoikkala


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