Swedish Dirty Money Affair Brings Bankers Closer to Police

(Bloomberg) -- The bank at the center of Sweden’s biggest money-laundering scandal says illegal transactions are probably still flowing through the broader financial system, because existing tools to stop them aren’t good enough.

Swedbank AB, which was fined over $400 million in March for failing to halt suspicious flows, has now teamed up with police and other banks in Sweden to figure out how to get better at fighting financial crime.

Anders Ekedahl, the head of Swedbank’s anti-financial crime unit in Stockholm, says the problem is that crooks can hide behind a sea of data. What’s more, banks have complained that they can’t freely share information on potentially illegal client conduct, for fear of breaching bank secrecy and privacy laws. That makes it hard to catch clients who use multiple banks to launder cash.

An audit commissioned by Swedbank and conducted by law firm Clifford Chance found that between 2007 and 2019, the bank’s senior management “failed to establish” clear lines of responsibility for preventing money laundering. The bank is still being investigated in the U.S., which may lead to additional fines.

An investigation into Swedbank found that it handled about $40 billion in risky transactions, in an affair that links it to the $220 billion dirty money scandal that engulfed Danske Bank A/S in 2018. The case ended the career of Swedbank’s former chief executive, Birgitte Bonnesen, herself subject to investigation.

“It’s not like criminals try to make it easy for banks. There are several stages in each transaction, and without seeing all those stages it’s hard to finish that puzzle,” Ekedahl said.

Since money laundering allegations first stained the reputation of Nordic banks, the industry has lobbied for new laws to allow greater information sharing. Banks also want more freedom to drop potentially dodgy clients.

Swedbank, which is due to hold its annual general meeting today at which the legal fate of its former CEO may be among topics discussed, says it has spent the past years building up its anti-crime efforts, as it works to restore its reputation. It now has more than 600 people dedicated to catching suspicious conduct.

But with the industry processing “billions of transactions” each year that trigger “tens of thousands of alerts,” according to Ekedahl, criminals can still get through the cracks. He compares the process to “looking for a needle in a haystack” and says “we want to improve that.”

The new partnership with police -- the Swedish Anti-Money Laundering Intelligence Initiative -- is a pilot project aimed at improving coordination. If it’s deemed a success by the end of the year, Ekedahl says he hopes it will result in new laws that enable closer tracking of money flows across banks to catch suspected criminals.

©2020 Bloomberg L.P.