Efforts to fight money laundering across the Nordic and Baltic states took a more aggressive turn on Friday.
Estonia’s state prosecutor is expanding an investigation into Danske Bank A/S to include Swedbank AB of Sweden. Meanwhile, the accounting firms Ernst & Young and KPMG were both reported to the police in Denmark amid allegations they failed to respond to red flags tied to possible money laundering.
The development comes as officials across both regions struggle to reset their public image against a backdrop of spiraling dirty-money scandals in their backyards. A picture has formed in which criminals from the former Soviet Union often sought out the Baltic units of Nordic banks to channel their funds into the West.
Since it was revealed last year, Danske’s $230 billion Estonian laundering saga has exploded to engulf multiple other firms. Swedbank, which from its base in Stockholm dominates the financial markets of the Baltics, is the latest bank to find itself the target of probes which investors fear will lead to hefty fines.
Estonia’s state prosecutor may decide to open a separate investigation into Swedbank, depending on what it finds through the current probe, according to spokeswoman Olja Kivistik.
A $1 Trillion Problem
The prosecutor based its decision on information in a criminal complaint from Hermitage Capital Management co-founder Bill Browder. The financier, who’s made a career of chasing money launderers, says that roughly $1 trillion in questionable Russian funds is either already inside the European Union, or trying to get in, much of it via the Baltic region.
The investigations “probably should be tied together because some of the money flowed from Danske Bank to Swedbank,” Browder said. “Many of the banks in Estonia were sending money to one another, and so it’s quite logical to combine these cases.”
Swedbank, which is Sweden’s oldest lender, had long tried to play down allegations against it. But it was forced to backtrack earlier this year after Sweden’s main broadcaster, SVT, published a series of bombshell allegations, including claims that Swedbank may have handled more than $100 billion in suspicious flows between 2010 and 2016 alone.
Swedbank has since fired its chief executive officer, Birgitte Bonnesen, and parted ways with the chairman who had backed her, Lars Idermark. But investors have signaled those measures might not be enough.
Misleading Statements
Meanwhile, a separate probe by the Swedish Economic Crime Authority is under way amid concerns Swedbank may have misled the public. The lender is also accused of misleading the Department of Financial Services in New York, which has started its own investigation.
In an email on Friday, Swedbank’s head of communications, Gabriel Francke Rodau, said that the bank “cooperates with all relevant authorities. And we have no further comments at this point of time.” The bank is due to publish its first-quarter results on April 25.
After money laundering allegations against Swedbank first surfaced in Swedish media in February, the bank’s share price dropped about 30 percent through late March.
Sweden’s prosecutor has said it won’t pursue a criminal complaint by Browder, citing a statute of limitations, a decision that the London-based investor has appealed.
“The Swedbank case deserves very serious attention from law enforcement in the Baltics and in Sweden,” he said.
Toughest in Europe
In Denmark, Business Minister Rasmus Jarlov is going out of his way to push some of Europe’s toughest anti-money laundering laws. Lawmakers agreed last month to rules that would ban an accounting firm from doing business if it doesn’t do its job properly. Denmark has also empowered its financial regulator, giving it the freedom to impose fines as high as $4.5 billion without going via the courts.
Ernst & Young is being investigated for its audit of Danske’s accounts in 2014. KPMG is on the hook for its 2017 audit of Kobenhavns Andelskasse, a local bank that was shut down last year amid concerns it was systematically used for money laundering.
Source: https://www.bloomberg.com/news/articles/2019-04-12/estonia-expands-danske-bank-criminal-probe-to-include-swedbank