Tuesday, December 15, 2020

CRIMINAL CAPITALI$M 
U.S. investigation report hits SEB, Swedbank and Danske Bank shares

By Simon Johnson and Colm Fulton
Tue, December 15, 2020


Signage is seen at the United States Department of Justice headquarters in Washington, D.C.

By Simon Johnson and Colm Fulton

STOCKHOLM (Reuters) - The Department of Justice (DOJ) and FBI are investigating SEB, Swedbank and Danske Bank over possible breaches of U.S. anti-money laundering regulations and fraud, Swedish newspaper Dagens Industri reported on Tuesday, sending the banks' shares lower.

Sweden had received requests for help from U.S. authorities investigating a Baltic money-laundering scandal that has already led to local fines for Swedbank, Danske and SEB, the newspaper reported.

The banks were being investigated by the DOJ, the FBI and federal police and a federal prosecutor in New York over possible fraud and breaches of anti-money laundering regulations, it added.

Although the banks have admitted to probes by U.S authorities over the past year, the report is a reminder that the scandal could yield further - and potentially heftier - fines, after each lender was penalized by local regulators.

"We have previously communicated, for instance in connection with our latest quarterly report, that U.S authorities continue to investigate Swedbank's historic work against money-laundering and historic publication of information," Swedbank spokeswoman Unni Jerndal said in response to the report on Tuesday.

SEB said it had received inquiries from U.S authorities, but was not aware of any allegations against it.

Danske Bank spokesman Stefan Singh Kailay said: "It is known that we are being investigated by authorities in Denmark, the U.S., Estonia and France, and we continue to be in close dialogue with them all."

The U.S. Department of Justice - which can also speak for the FBI - declined to comment.

"While all three banks have previously disclosed ongoing AML investigations by 'U.S. authorities', (the) FBI's involvement and 'fraud' appear to be new," Credit Suisse said in a note.

Shares in all three banks were down, with Swedbank off 7.7%, SEB 5.6% lower and Danske Bank down 3.3%.

"I wouldn’t say we are in a very different position compared to before the news broke … I think it's more of a reminder of the potential costs of the scandal," said Robin Rane, an analyst at Kepler Cheuvreux.

While local fines for lax money laundering controls in the Baltics have been hefty, they could be dwarfed by any punishment meted out by U.S. authorities.

Deutsche Bank was fined $7.2 billion and Britain's Barclays $2 billion over the sale of toxic mortgage debt in the run up to the financial crisis of 2008-2009.

And this year, U.S. bank Wells Fargo agreed to pay $3 billion to resolve criminal and civil probes into fraudulent sales practices.

Rane said Kepler Cheuvreux estimates additional fines of$441.84 million for Swedbank and $3.27 billion for Danske.

BALTIC SCANDAL

The scandal first surfaced in 2018 when Danske admitted that suspicious payments totalling 200 billion euros ($243 billion)from Russia and elsewhere flowed through its branch in Estonia.

It spread to Sweden, where Swedbank was fined a record 4 billion Swedish crowns ($477 million) by the country's Financial Supervisory Authority over flaws in its anti-money-laundering work and for withholding information from authorities.

Swedbank lost a third of its market value in 2019.

SEB was fined 1 billion crowns for failures in compliance and governance in relation to anti-money laundering controls in the Baltics.

Swedbank and SEB have both said previously that U.S. authorities were looking at their activities in the Baltic, but not given further details.

Danske Bank said in its 2019 report that it was under investigation by the U.S. DOJ and the U.S. Securities and Exchange Commission.

($1 = 0.8240 euros)

($1 = 8.3740 Swedish crowns)

($1 = 6.1207 Danish crowns)

(Reporting by Colm Fulton, Simon Johnson Supantha Mukherjee, Johannes Hellstrom and Helena Soderpalm in Stockholm, Jacob Gronholt-Pedersen in Copenhagen and Michelle Price in Washington; Editing by Johan Ahlander, Alexander Smith and Bernadette Baum)

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