Sweden's oldest bank hires law firm as money-laundering crisis grows

Swedbank is being investigated by authorities of Sweden, Estonia and the US, amid claims it was part of a $230 billion Danske Bank scandal

Swedbank is coming under increasing pressure over fraud allegations. Reuters

Swedbank hired the law firm Nordia as its external legal counsel to handle a criminal investigation into potential fraud, amid a growing money-laundering scandal that has engulfed the bank.

Last week, Swedbank fired chief executive Birgitte Bonnesen as laundering allegations against Sweden’s oldest bank and biggest mortgage lender pile up, Bloomberg reported. The lender is being investigated by the financial supervisory authorities of Sweden and Estonia, as well as by authorities in the US, amid claims it was part of the $230 billion Danske Bank Estonian scandal.

Swedbank’s share price has plunged by about a third since the case first erupted on February 20.

The Stockholm-based lender published a statement by Nordia on Sunday, in which it challenged the prosecutor’s assessment in Swedish media that Swedbank had been unco-operative.

In February, Danske Bank reported a 28 per cent drop in 2018 profit, cut its dividend and promised to spend around $300 million to tighten safeguards against financial crime.

The bank is being investigated in Denmark, Estonia, Britain and the US over suspicious payments through its Estonian branch between 2007 and 2015 and could face hefty fines.

Denmark's largest bank said it had seen a fall in customer satisfaction both for retail and corporate clients and that it would spend up to 2bn Danish kroner (Dh1.10bn) to step up anti-money laundering efforts, such as improving IT systems and hiring compliance staff.

Nordia on Sunday said allegations by the prosecutor that Swedbank “has not co-operated during the search in the desired way, but to the contrary has hampered the search by not waiving the attorney client privilege and the confidentiality” is “completely incorrect and incomprehensible”.

According to Nordia: “It was pointed out that information covered by attorney client privilege cannot be seized”. The law firm said that the prosecutor’s subsequent decision to seize the documents is “in direct conflict with Swedish law”.

Swedbank has, on Nordia’s advice, placed the documents in question in a sealed envelope that has been marked to make clear that the material is subject to attorney client privilege, Nordia said.

Swedish authorities searched the head office of Swedbank on Wednesday as part of the investigation into the bank's handling of money laundering allegations at its Baltic branches.

Adding to pressure on the lender, state broadcaster SVT said separately that Swedbank may have misled US investigators over transactions by its customers linked to Mossack Fonseca, a Panamanian law firm at the centre of a global tax avoidance and money laundering scandal.

Regulators in Sweden, Estonia, Latvia and Lithuania began a joint investigation into Swedbank after SVT in February reported allegations that at least 40 billion Swedish crowns (Dh15.79bn) in suspicious transactions took place between Swedbank and Danske Bank's Baltic accounts over the same period, according to Reuters.

Swedbank is defending itself on many fronts: Bill Browder, an investor who campaigns to expose money laundering, has filed a separate criminal complaint with Swedish authorities and SVT previously reported that internal documents show Swedbank's board knew it had missed suspicious transactions but failed to take corrective action.

Swedbank has in each instance said it cannot comment on specific transactions or details about clients due to banking confidentiality laws.

SVT said on Wednesday it had obtained confidential documents showing that Swedbank told the New York State Department of Financial Services it only had customers from Sweden and Norway, with ties to Mossack Fonseca.

That was despite the fact that a number of companies with ties to the law firm had done business through Swedbank in the Baltics, SVT said.

Neither the US Embassy in Sweden, which in February asked the country's financial watchdog for a meeting to discuss the allegations about Swedbank, nor the Swedish financial watchdog had any immediate comment at the time.

The US Securities and Exchange Commission declined to comment, while the US Department of Justice and the New York State Department of Financial Services were not immediately reachable for comment outside of regular US business hours at the time.