Days of Fear and Surprise as Nordic Laundering Scandal Widened

(Bloomberg) -- The money laundering scandal that’s swamped banks in the Nordic region escalated as Swedbank AB’s CEO was forced out and a financial regulator in New York joined the authorities demanding answers.

Swedbank, Sweden’s oldest lender and the main financial presence in the Baltic region, dominated headlines again. CEO Birgitte Bonnesen was fired by the board amid claims she misled the public and regulators over the bank’s involvement in the $230 billion Danske Bank A/S Estonian laundering scandal. Swedbank’s share price has plunged by about one-third since the case erupted on Feb. 20.

Here’s a day-by-day look at Nordic banks’ bad week:

March 26

Swedish broadcaster SVT published more damning disclosures on Swedbank. The network said a Norwegian law firm hired by the bank to investigate its Estonian unit concluded, in a report handed to management early this year, that as much as $23 billion in potentially suspicious flows passed through that unit every year between 2010 and 2016. The report, SVT said, advised Swedbank to inform authorities in Sweden and Estonia immediately. Most of the money originated in Russia.

SVT also said Swedbank’s Estonian unit had investigated potential links to the Sergei Magnitsky case as early as 2013. The report, confirmed by the head of Swedbank’s Estonian unit, was sent to Bonnesen, who was then in charge of Swedbank’s Baltic operation, SVT said. Magnitsky, a lawyer, died in a Russian jail after investigating tax fraud.

March 27

SVT reported that Swedbank’s top management withheld information from U.S. investigators about suspicious customers and transactions, citing confidential documents it obtained. The broadcaster also said former Trump campaign chairman and convicted felon Paul Manafort and deposed Ukrainian President Viktor Yanukovych were among those to have received suspicious payments through Swedbank.

At this point, there were signs that some of Swedbank’s largest shareholders were starting to lose confidence. The pension providers AMF and Alecta, both part of the nomination committee that proposes members to the bank’s board, said they weren’t satisfied with Swedbank’s handling of the laundering allegations. The two hold a combined stake of about 9 percent.

Then the case started snowballing:

  • Sweden’s Economic Crime Authority raided Swedbank’s headquarters in a probe of whether the bank breached insider rules by informing its largest shareholders of a forthcoming SVT report in February. That report wiped out a fifth of the bank’s market value in two days.
  • SVT said the Department of Financial Services in New York had was examining whether Swedbank provided misleading information following requests relating to Mossack Fonseca, the law firm at the heart of the so-called Panama Papers disclosures.
  • Folksam, Swedbank’s second-largest shareholder, joined AMF and Alecta in publicly criticizing the bank’s handling of the scandal.
  • Swedbank shares plunged 12 percent, the biggest slump since the money-laundering allegations emerged in February.
  • In the evening, the Economic Crime Authority said it was now investigating potential aggravated fraud on top of the insider probe. The prosecutor handling the case said communication from the bank between October and February "gives a picture of Swedbank seemingly having spread misleading information to the public and the market."
  • Bonnesen responded that "Swedbank believes that it has been truthful and accurate in its communications," and added: "I will do everything in my power to handle the current situation."

March 28

But it was too late. The tide had turned against the 62-year-old Dane. As Swedbank shareholders prepared to head to the annual general meeting in central Stockholm, Alecta, AMF and Folksam said they wouldn’t grant Bonnesen freedom from liability for 2018, signaling that they’d lost confidence in her.

Trading in Swedbank shares was halted abruptly on the Stockholm exchange. Just one hour before Bonnesen was to take the stage at the AGM, the board announced that she had been dismissed.

The meeting went ahead, ringing with criticism of the board and its chairman, Lars Idermark. But with the support of the major shareholders, he and his colleagues were re-elected and freed from liability for 2018. After promising more transparency, a quick 15-minute scrum with journalists after the AGM left many wondering if the promises were hollow.

After the AGM, Alecta and AMF said they may seek an extraordinary meeting with other holders to elect a new board, meaning Idermark may be forced out.

Swedbank shares slumped 7.8 percent on the day, bringing the decline since mid-February to more than 30 percent. As concerns grew that other banks with operations in the Baltics could be drawn in, SEB AB dropped 6.9 percent and Nordea Bank Abp fell 2.6 percent.

March 29

New York’s Department of Financial Services asked SEB and Nordea for detailed information about transactions with Danske Bank, according to a person familiar with the matter. The banks must also give the DFS more information about their work with Mossack Fonseca, the person said, citing letters to the banks dated March 28.

SEB said the bank has “continuous contact” with the authorities that supervise the markets in which it operates. SEB "always cooperates with full transparency and shares the information that authorities request," it said. The bank’s CEO, Johan Torgeby, said earlier in the week that SEB had “found no indication” that “we have systematically been used for money laundering.”

Nordea, too, said it’s in "close cooperation with authorities in all countries where we operate," adding that the bank has increased its efforts to prevent money laundering throughout its operations.

©2019 Bloomberg L.P.

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