UPDATE 2-Swedish FSA slaps record $386 mln fine on Swedbank over money laundering breaches

(Adds context, analyst quote)

By Colm Fulton, Johan Ahlander and Simon Johnson

STOCKHOLM, March 19 (Reuters) – Sweden’s financial watchdog hit lender Swedbank with a record fine of 4 billion Swedish crowns ($386 million) on Thursday for serious deficiencies in its management of money laundering risks in its Baltic operations.

Sweden’s oldest retail bank saw its share price collapse by a third last year after details of the dirty money scandal — which also engulfed Danish peer Danske Bank — emerged at the end of 2018 and through 2019, forcing it to fire its CEO and much of its board.

“Our investigation shows that the Swedish management did not efficiently address the risk of money laundering in the Baltics,” FSA Director General Erik Theden said in a statement.

“It is also deeply concerning that the bank on a number of occasions withheld information from (the FSA) that would have revealed the seriousness and scope of the problems.”

Estonia’s FSA financial watchdog said in a simultaneous statement following their joint investigation that a criminal inquiry in Estonia will now determine whether money laundering had taken place.

Swedbank was alleged to have processed suspect gross transactions of up to 20 billion euros ($22 billion) a year from mostly Russian non-residents through Estonia from 2010 to 2016.

“The bank’s awareness of the risk of money laundering and its processes, routines and control systems were insufficient,” the FSA said. “The Baltic operations were also lacking adequate resources to combat money laundering.”

The penalty exceeds the bar set in 2015 when the FSA hit lender Nordea with a fine of 50 million Swedish crowns ($4.83 million), which was the maximum allowed at the time.

Swedbank remains under investigation in the United States and Estonia. Last week, Swedbank said an internal investigation by its law firm found that transactions totaling $4.8 million potentially violated U.S. sanctions.

Analysts said that in terms of the potential U.S sanction breaches, the total amount of suspect transactions was fairly small.

Violating U.S sanctions can lead to significant fines. French lender BNP Paribas paid a $8.9 billion settlement in 2015 to resolve claims it committed major violations of sanctions imposed on Sudan, Cuba and Iran.

Swedbank entered the Baltics in the 1990s after the fall of the Soviet Union and it is now the biggest bank in Estonia in terms of market share for services such as deposits and lending.

The lender had to sign up for a Swedish state aid scheme during the financial crisis as loan losses in its Baltic operations threatened to bring the bank down.

“The fine comes in slightly below expectations. I haven’t seen anything in the FSA’s statement so far that makes me more concerned … so I think we can start to move on,” said Andreas Hakansson, an analyst at Danske Bank. ($1 = 10.3665 Swedish crowns) (Reporting by Colm Fulton, Johan Ahlander and Simon Johnson; Editing by Catherine Evans)

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