Swedbank Says It Won't Be Tainted by Baltic Laundromat Case

(Bloomberg) -- The biggest bank operating in the Baltic region is confident it won’t be drawn into the money laundering scandals that have tainted some of its peers.

Swedbank AB of Sweden, which dominates the financial industries of Estonia, Latvia and Lithuania, says its focus on domestic customers over the years has protected it from the kind of illicit flows that allegedly gushed through Danske Bank A/S’s business in Tallinn and, to a lesser extent, into Nordea Bank Abp, according to filings with Nordic prosecutors.

Birgitte Bonnesen, Swedbank’s chief executive officer, says the sources of potentially suspicious flows linked to other banks have no ties to her bank.

“None of the names that have been out there have ever been customers of Swedbank, former or now,” she said on a conference call on Tuesday after the bank reported third-quarter results. “But the most important thing I can tell you is that we run a retail bank in Baltic countries.”

Danske’s Estonian Scandal

The comments follow Danske Bank’s admission that much of about $230 billion that flowed through a tiny Estonian unit between 2007 and 2015 may need to be treated as suspicious transactions. Denmark’s biggest bank is now the target of criminal investigations in multiple jurisdictions, including in the U.S. Nordea was this month accused by Bill Browder of being involved in similar breaches, though on a much smaller scale. Both banks have said they’re working closely with the relevant authorities.

On a conference call with analysts, Bonnesen fielded multiple questions about Swedbank’s efforts to ensure it didn’t abet money laundering. One analyst noted that the bank’s Latvian unit was fined in 2016, the year it stopped providing services to 500 clients registered in countries such as Cyprus and Malta. The bank was also reprimanded by Lithuanian authorities in February.

Bonnesen said that less than 0.5 percent of Swedbank’s Baltic customers stem from Russia or former Soviet Union states. She also said her bank has reviewed customer lists going back to 2008 and found nothing.

“We’ve checked for everything,” Bonnesen said.

Swedbank has about 3.3 million customers in the Baltic region. Of those about 0.45 percent are private individuals, including guest workers, while about 0.05 percent are corporate customers, the bank said. Gregori Karamouzis, head of investor relations, said the bank checked various, individual transactions that were executed between Swedbank and Danske from 2007 into 2015 that “could lead to suspicion.”

“We did not find any of Danske’s customers, that either have been mentioned in public media or in other circumstances, being customers of ours,” Karamouzis said in an email in response to questions. The bank drew on names mentioned in the media and public customer lists, he said.

According to a bank presentation, an increase in outgoing cross-border payments from its Estonian unit from 2009 mirrored improvements in that country’s economy. The outgoing payments totaled 15 billion euros ($17 billion) in 2015, up from 10 billion euros in 2009.

Still, Bonnesen said Swedbank’s management is “humble enough to understand that this topic is so incredibly complex that you need to work with others.” She also said that “every time we see something, we act and we act forcefully and that has been a huge strength.”

Third-Quarter Results

Swedbank did better than analysts expected last quarter after its $150 billion asset management business contributed to a big jump in income that helped the lender deliver a 16 percent increase in profit.

Net commission income grew 13 percent in the third quarter from a year earlier, Swedbank said on Tuesday. “A bullish stock market benefited our asset management business, at the same time that card income was seasonally strong,” it said. “Increased asset management income due to higher asset values and good inflows contributed positively.”

Assets under management at Swedbank grew to 1.39 trillion kronor, or just over $150 billion, at the end of September. A year earlier, the business had total assets of 1.24 trillion kronor. Sweden’s benchmark OMXS30 index gained almost 7 percent last quarter, while the Stoxx Nordic 30 index rose almost 6 percent in the period.

Swedbank Says It Won't Be Tainted by Baltic Laundromat Case