Swedbank AB’s regulators made clear it now faces a bigger risk of having to pay a fine amid allegations its Baltic operations may have handled over $100 billion in potentially suspicious funds from the former Soviet Union.
Sweden’s financial watchdog gave its strongest indication yet that there’s evidence of serious wrongdoing at Sweden’s oldest bank and biggest mortgage lender. Its findings to date show there could be grounds for sanctions, which under Swedish law can mean fines of up to 10% of a bank’s total annual income.
The Swedbank case exploded earlier this year after the bank was forced to cease months of misstatements and acknowledge its involvement in the $220 billion Danske Bank A/S laundering scandal.
The development cost Chief Executive Officer Birgitte Bonnesen her job in March, and Swedbank said last week it’s now being investigated by multiple authorities in the U.S. On Monday, fresh allegations were leveled against the bank suggesting it may have breached European Union sanctions.
For Swedbank, even bad news might be better than the uncertainty that has shrouded the case all year.
“The investigation is like a cloud hanging over Swedbank, so the sooner the FSA reaches a decision, the better,” said Joakim Bornold, a savings advisor at Soderberg & Partners in Stockholm.
In statements on Tuesday, the Financial Supervisory Authorities of Sweden and Estonia both said their findings to date may result in sanctions. The FSA in Tallinn said it decided to escalate its probe after finding “evidence of a misdemeanor.”
The Swedish FSA, whose director recused himself earlier this year due to his ties to a former Swedbank board member, said it’s now found “sufficient grounds for assessing whether the deficiencies and weaknesses observed during the investigation should lead to a sanction or if the investigation should be closed in another manner.”
What Bloomberg Intelligence Says:
[su_quote]“A new Swedish FSA sanction case, coupled with Swedbank’s tight capital buffer — $800 million over the regulatory minimum — confirm its vulnerability to money-laundering fines, we believe, even though Danske Bank likely faces a larger penalty. The lender’s dividend, cut to a 50% payout, may need to change again if fines approach $1 billion.” —-Philip Richards, Senior Bank Analyst at Bloomberg Intelligence[/su_quote]
The regulator said it will now continue to analyze the circumstances in the matter as well as legal issues until the next step in the sanction process.
The FSA plans to announce its findings at the beginning of next year. A probe into the same matter at SEB AB is still ongoing, it said.
How Sweden Calculates Bank Fines:
[su_quote]The Swedish FSA can issue a fine if it finds that Swedbank has breached the law regarding money-laundering prevention. The size of the fine can amount to 10% of the bank’s total income in the previous year, or to two times the profit that the bank has made by breaching the rules, or to an amount equivalent to 5 million euros ($5.54 million). Swedbank reported total income of 44.2 billion kronor ($4.55 billion) last year, meaning that the fine based on 2018 numbers could be as high as 4.42 billion kronor.[/su_quote]
— With assistance by Christian Wienberg, Ott Ummelas, Frances Schwartzkopff, and Veronica Ek