Swedish bank SEB missed money laundering 'red flags' in Estonia: TV report

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(Reuters) – Swedish Television (SVT) reported on Wednesday that it had obtained a list of 194 clients of Swedish bank SEB (ST:) connected to suspected money laundering in Estonia.

The public broadcaster’s investigative show “Uppdrag Granskning” reported that the client list, which also showed about 2,000 transactions, contained “red flags” – names associated with well-known proxies for Russian non-resident companies suspected of money laundering.

SVT said the report was done in collaboration with the Organized Crime and Corruption Project consortium of investigative reporting, which provided a cache of leaked information.

SVT said the transactions included around 475 million Swedish crowns ($49.35 million) connected to the so-called Magnitsky affair in Russia. The money moved through SEB accounts, the broadcaster reported.

Sergei Magnitsky was a Russian lawyer arrested in 2008 after accusing Russian officials of involvement in large-scale tax fraud. He died in a Moscow prison in 2009 after complaining of mistreatment.

“I find it surprising that they didn’t see, both within their own client base, but also within some of the counterparties who were paying through their client base, significant areas for concern,” money laundering expert Graham Barrow said in the broadcast.

On Tuesday night SEB said in a statement that it had processed close to 26 billion euros ($28.66 billion) from non-resident Estonian customers between 2005 and 2018 that would not meet the bank’s current standards of transparency.

SEB Chief Executive Officer Johan Torgeby’s statement sought to defend the bank’s record.

“In the comprehensive analysis that we have made of our business in the Baltics, we have not seen that SEB has been used for money laundering in a systematic way,” he said.

“Still, at any given time, all banks are subjected to the risks that financial crime entail,” Torgeby added.

In April, Torgeby said he was “comfortable” with how the bank had conducted itself in the past but that there were no guarantees.

The revelations risk bringing SEB deeper into a long running Baltic money scandal which has hammered the shares of rival Swedbank and Danish lender Danske Bank.

SEB had managed to stay clear of the scandal until Nov. 15 when SEB shares fell 13% after the bank said broadcaster SVT had contacted it about the report airing on Wednesday.

On Nov. 20, Swedbank’s (ST:) CEO Jens Henriksson said the bank wanted to “get to the bottom” of a suspected funds transfer from a Russian arms company, which SVT said may have violated U.S sanctions.

Swedbank has lost around 40% of its market value since allegations surfaced that its Estonian branch processed suspect gross transactions of up to 20 billion euros a year from mostly Russian non-residents between 2010 and 2016.

The scandal started in 2017 with Danske Bank, Denmark’s biggest bank. In September 2018, CEO Thomas Borgen resigned and the bank detailed compliance and control failings.

Danske Bank is under investigation in several countries over 200 billion euros ($220 billion) in suspicious payments moved through its Estonian branch between 2007 and 2015 in one of the largest money laundering scandals uncovered.

At market close on Tuesday, SEB shares were down almost 8% since the start of the year. Before SEB’s Nov. 15 statement, the bank had been trading up over 7% for the year.

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