Following $107M fine for lax controls, SEB shares AML efforts

“Despite the increased risk of money laundering in the Baltic countries, the bank has acted too little and too late,” Director General Erik Thedéen said in a translated statement.

The supervisory review by Swedish Finansinspektionen (FI) relates to the period of 2015 to the first quarter of 2019. It concluded SEB’s subsidiaries in the Baltic countries were “exposed to an increased risk of money laundering, partly because of the geographical location and partly because customers with a higher risk of money laundering accounted for a considerable part of the subsidiaries’ business volumes and transactions.”

The FI’s supervisory review further concluded SEB:

• Had deficiencies in identifying and managing money laundering risk associated with some foreign customers and domestic customers with foreign owners;
• Failed to remedy the deficiencies identified by the bank’s supervisory body “to a sufficient extent”; and
• SEB’s internal control functions and transaction monitoring were not sufficiently resourced.

While the FI acknowledged SEB has taken, and continues to take, measures to correct its AML deficiencies, it said the bank’s shortcomings during the investigation period “nevertheless meant that the bank did not live up to the requirements the law requires.”

The FI further reviewed the extent to which SEB’s Swedish operations lived up to the AML regulation requirements. Following that review, the FI “instructed the bank to take certain measures to improve its monitoring of transactions,” the agency said.

The FI said its review of SEB was done in coordination with regulatory authorities in Estonia, Latvia, and Lithuania. While the FI focused on SEB’s governance of AML in the Baltic subsidiaries, the Baltic supervisory authorities focused on how SEB’s Baltic subsidiaries complied with AML regulations in their operations.

As part of this review, SEB’s Estonian subsidiaries also received an injunction and a penalty from the Estonian Regulatory Authority for deficiencies in their work to counter money laundering in Estonia. The bank’s Baltic subsidiaries previously received a sanction in Latvia and an injunction to rectify deficiencies in Lithuania. All Swedish and Baltic supervisory authorities have hereby concluded their reviews regarding SEB’s AML work.

SEB responds

In a statement, SEB noted regarding the Baltic review that the FI issued a “remark, which is a lower degree of an administrative sanction that is issued when a breach has not been deemed to be serious.”

In a question-and-answer in response to the decision, SEB said the Swedish FI’s supervisory review did not look at whether the bank was used for money laundering, but rather at the bank’s processes and compliance. “No bank, SEB included, can guarantee that it has not been or ever will be exploited for attempted money laundering,” the bank stated. “Our work against money laundering develops, against this backdrop, continuously, not least because crime constantly evolves. Our work in this area will never end.”

In the past 10 years, SEB’s Baltic subsidiaries have reported more than 6,000 suspicious cases to the financial police, of which 1,500 came in 2019 alone, SEB said. Additionally, SEB said last autumn it published data showing the historical flows at SEB’s Estonian subsidiary, as well as the effects of the measures it has taken.

The bank further acknowledged weaknesses in its practices: “[W]hen we look back at history with our current knowledge and the current legislation in mind, there may be certain measures we could have taken earlier. Over the years, the rules have been sharpened, awareness has increased, and the bank’s routines and processes have been improved. Our systems are not perfect, but we work continuously to strengthen our abilities to prevent, detect, and report potential cases of money laundering.”

President and CEO Johan Torgeby said SEB will now analyze the decision. “We always strive to adhere to current regulations and our high internal standards, and we continuously develop the bank’s abilities to prevent, detect, and report suspected money laundering and other types of financial crime,” Torgeby said. “That work is of highest priority and will never end.”

Similar actions

In March, Swedbank was issued a record $390 million administrative fine for what Sweden’s financial watchdog called “serious deficiencies in its management of the risk of money laundering in its Baltic operations.” That conclusion was drawn from parallel investigations conducted by the FI and Estonian Finantsinspektsioon into parent company Swedbank AB and its subsidiary bank Swedbank AS in Estonia regarding both banks’ AML practices.

More cases like the ones seen with SEB and Swedbank could be on the way. In May 2019, financial regulators in eight Nordic and Baltic countries agreed they would share more information among one another to fight money laundering and terrorist financing. Regulators said they plan to develop a coordinated process for exchanging information across Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, and Sweden.