Swedbank Likely Violated U.S. Sanctions in Laundering Case

(Bloomberg) -- Swedbank AB probably breached U.S. sanctions after a report commissioned by Sweden’s biggest mortgage lender found that about $4.8 million in transactions violated Treasury Office rules on foreign assets.

Chief Executive Officer Jens Henriksson said he couldn’t rule out that the figure might rise. The current numbers are based only on a review of Swedbank’s Baltic operations, but the probe isn’t finished, he said in an interview in Stockholm on Wednesday.

Swedbank is alleged to have handled as much as $155 billion in potentially suspicious transactions via its Baltic operations. Like Danske Bank A/S, the Swedish lender is being investigated in Europe and the U.S. amid signs that tainted money from the former Soviet Union systematically flowed via Nordic banks’ eastern outposts, and into the West.

Law firm Clifford Chance found that 586 transactions were probably on the wrong side of U.S. sanctions laws, Swedbank said. Of those, 508 transactions were related to a vessel whose owner and operator were in Crimea, the Ukrainian peninsula that was annexed by Russia in 2014. That annexation triggered western sanctions.

According to Henriksson, $4.8 million is such a “small” figure that it could help offset any potential fines. Swedbank now needs to submit a report to the U.S. Treasury’s Office of Foreign Assets Control (OFAC), and will publish a complete report for the general public on March 23.

“If we’ve had a breach of the OFAC sanctions list, then it’s clear that the probability increases that we’ll get some kind of sanction from OFAC,” Henriksson said. Still, “it’d be a mitigating circumstance that it’s small volumes and that it concerns jurisdictions rather than individuals and companies, and that it’s self-reported.”

Philip Richards, senior banks analyst for Bloomberg Intelligence, said, “As it stands, Swedbank is the most exposed Nordic lender to a potential fine in our view, due to its tight capital buffer over regulatory needs of just $1.2 billion.” But he also noted that size of potential sanctions violations is “very small.”

Swedbank shares gained with most other stocks when trading started on Wednesday. By 11 a.m. in Stockholm, Swedbank was up about 4%, while the Bloomberg index of European financial stocks gained 2.3%.

Today’s development brings “a bit of a sigh of relief, it could have been significantly worse,” said Joakim Bornold, a savings adviser at Soderberg & Partners.

But investors should remember that they still “have the whole money laundering bit left,” he said.

Read More Here: Swedbank Laundering Report Is Positive Trigger, Morgan Stanley Says

Clifford Chance examined all the dollar-denominated transactions from the three Baltic subsidiaries in Estonia, Latvia, and Lithuania, processed through the U.S. financial system during the period March 2014 through March 2019.

The Swedish lender fired its former chief executive officer, Birgitte Bonnesen, in 2019 after a police raid on the Stockholm-based bank’s headquarters and amid signs that she’d misled the public about the dimensions of the scandal.

Swedish authorities are expected to publish the findings of their investigations into the lender on March 19.

To contact the reporters on this story: Charles Daly in Stockholm at cdaly22@bloomberg.net;Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net

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

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