Wallenbergs Defend Their Bank Amid Dirty Russian Money Claim

(Bloomberg) --

The Wallenberg family has jumped to the defense of its bank, SEB AB, after it was accused of enabling Russian money laundering.

Shares in SEB rose more than 4% on Wednesday after the Wallenbergs led investors in brushing off a report by Swedish state broadcaster SVT, which said the bank failed to stop dirty money from flowing through its Baltic operations over several years.

Investor AB, the vehicle through which the Wallenbergs hold about 20% of SEB, said the bank is acting transparently. That’s after SEB identified almost $30 billion in non-resident Estonian flows that exposed it to an “increased risk for money laundering.”

“We have confidence in how the bank works with these issues,” said Viveka Hirdman-Ryrberg, a spokeswoman for Investor AB. “We also think it’s good and important that the bank is being transparent, as they have been.”

SEB pre-empted Wednesday’s report by SVT by publishing its own numbers. The bank says its non-resident flows in Estonia totaled about $93 billion between 2005 and 2018. Of that, roughly a third was deemed “low transparency.”

The total figure compares with as much as $220 billion of suspicious transactions at Danske Bank A/S and allegations that Swedbank AB may have handled more than $100 billion in potentially suspicious flows. Both Danske and Swedbank are being investigated in the U.S.

Allegations of money laundering have proven ruinous for some of the biggest Nordic banks. Danske’s share price is down about 30% this year, after plunging by almost 50% in 2018. Swedbank has lost almost 40% of its market value this year. The two firms fired their chief executive officers and are now cooperating with multiple authorities as investigations drag on.

Danske’s biggest investor, A.P. Moller Holding, was quick to censure the lender as the full scale of its scandal became public in late 2018. The investor, which holds just over 20% of Denmark’s largest bank, pushed out Danske’s chairman in response to the affair. It’s worth noting that the chairman of SEB is Marcus Wallenberg, who’s had the job since 2005.

Sergei Magnitsky

SVT alleges that 475 million kronor ($50 million) that flowed through SEB can be linked to Russian tax fraud that Sergei Magnitsky died trying to investigate. Magnitsky was the lawyer of Hermitage Capital Management co-founder Bill Browder, who has made it his mission to chase down those tied to the case.

Johan Torgeby, SEB’s chief executive officer since early 2017, said in an interview that SVT’s broadcast “claims a lot of things” for which “we don’t know exactly where they get the numbers or how they’ve done the analysis.” The link to the Magnitsky case “is very unclear when you see the program.”

The bank has “no indications” that any of the 179 companies mentioned as part of the Magnitsky case have ever been clients of SEB, he said. That doesn’t rule out the possibility that money might have flowed between Magnitsky companies and SEB clients.

The allegations brought against SEB are “very serious,” said Frida Bratt, a savings adviser at Nordnet. But the bank has taken appropriate measures to fight the risks of laundering, she said. Joakim Bornold, an adviser at Soderberg & Partners, had a similar response. “Has dubious business been conducted? Yes. Could SEB have done more? Yes, probably. But the bank has been active and weeded out many of these clients.”

The Swedish Shareholders’ Association was less forgiving. Joacim Olsson, the group’s CEO, says he wants to know whether Torgeby hid information from the public.

SEB has so far maintained that it hasn’t found any evidence of “systematic” laundering.

“Still, at any given time, all banks are subjected to the risks that financial crime entail,” Torgeby said in a statement.

SEB said:

“From 2006 and onwards, SEB has been working in a structured and determined way, in order to reduce the risk of being exploited in money laundering activities in the Baltic countries. After receiving criticism from the Estonian financial supervisory authority and information from another external source in 2006, the bank took several active decisions in order to reduce risk exposure related to money laundering. A large number of customer relations were ended. As new information has emerged, SEB has continuously ended customer relations and has been reporting suspicious activities to relevant financial police.”

SVT cooperated with news agency TT and a group of journalists from Finland’s YLE and the OCCRP network (the Organized Crime and Corruption Reporting Project) in investigating SEB’s Baltic business between 2005 and 2017. OCCRP contributed with “a large leak” regarding Lithuanian lender Ukio and its transactions. SVT also had access to “secret documents” regarding SEB, from “within the banking system,” it said.

The broadcaster says it identified 194 customers with SEB accounts in the Baltics and Sweden who resided elsewhere, so-called non-resident clients. Of those, 130 were deemed high-risk customers showing “clear warning signals” of suspected money laundering, SVT claims. It said 150 were based in countries such as the British Virgin Islands, the U.K., Belize and Panama, which are so-called risk jurisdictions.

After being contacted by SVT, SEB said on Nov. 19 that it had compared the 194 names on SVT’s list with its own internal analysis. The names on the list have “previously been handled and approximately 95% of the customer relations are terminated,” SEB said then, adding that “a majority of the names on the list are historical customer relations from Estonia.”

Of the few clients on SVT’s list that still have engagements with SEB, the bank said its assessment is that they meet its criteria and that, with the information that SEB has about the customers today, there has been no reason to terminate those customer relations.

--With assistance from Veronica Ek and Niklas Magnusson.

To contact the reporters on this story: Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net;Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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