Swedbank Sweden is set to publish the results of an audit commissioned in the aftermath of money laundering scandals tomorrow. CEO of Swedbank Estonia Robert Kitt admits there have been corresponding inquiries before but remains tight-lipped when it comes to results – Kitt cannot comment on whether some conclusions drawn by the bank have reached the police’s money laundering data bureau.
Back-to-back revelations have sent Swedbank’s share into freefall and raised fears of Swedish banks leaving the Baltics altogether.
Kitt says that Swedbank has always been interested in ascertaining the facts behind such scandals and that he has never heard talk of pulling out of the region.
Financial Times wrote how Baltic banking watchdogs are afraid Swedish banks will simply up and leave the region as a result of money laundering scandals. How far are such fears founded in your opinion?
It is a very serious matter – that a single topic can lead to a far bigger and more serious development. But I believe the Estonian economy is working. Our role is to finance the economy, and we plan to continue doing just that. There will always be risks, but we intend to stay. Swedbank has always said we have four markets – Sweden, Estonia, Latvia and Lithuania – and I know of no plans to change that.
So… are the fears founded or not?
It is pure speculation. I cannot comment on it in any other way.
Investors say their shares are burning because of what is happening in the Baltics. You are not hearing complaints or concerned statements from there?
It has been discussed quite thoroughly in the Swedish media. The share price has come down and money has become more expensive, which is perhaps even more consequential if you’re in the loan business. But I can assure you there is no strategy that would see us pull out of the region.
We are always talking to investors, but here in Estonia, we are busy catering to our clients and issuing loans. That is our bread and butter.
Have you been criticized from Sweden as CEO?
I have not. We are continuously working with Sweden, both regarding this scandal and everything else. My personal role is not even that relevant in this situation.
Should you have done something differently in the past?
That is an important question. The “know your client” principle has always been there, but what has changed? Google in 2019 is definitely different from Google in 2012 – we have more information today and easier access to registers.
Another thing that has changed is that offshore companies were not prohibited before the so-called Panama leak, but now we have seen a paradigm shift in just a short time, and offshore ventures are no longer acceptable. Business culture has changed. And the press has played an important role in that change.
Could we have done more? It is always possible to do better. But like I said, we have more information today.
Instead, we hear from time to time how banks are too backward. Swedbank has chosen to know its clients. My friends who run startups have told me we are in lockdown and are keeping foreign capital out.
But I want to say that when we get new information, we always go over it and notify the police or prosecution if necessary.
When we wrote about Formus Baltic in our first article, sums stretched into hundreds of thousands of euros for each individual transfer. While I understand millions upon millions of transfers take place every month, not many of them are of this magnitude. Should transfers of this size leave a blip on a radar somewhere?
We simply cannot discuss individual clients. It’s banking secrecy. We do not want to break the law. There is also an ethical dilemma here: if I did, I would be affecting the client’s business one way or another, and that simply wouldn’t be ethical.
I’m sure you want to know whether we reported the incident in question. We cannot comment on that, also because we are not allowed to discuss it pursuant to the anti-money laundering act. It could affect the work of the authorities.
We also cannot describe anti-money laundering systems in detail as the information could be put to illegal use.
We can say that Swedbank has made considerable investments into systems, processes and people. Resources spent on transaction monitoring have grown by leaps and bounds compared to a few years ago.
A bank is infrastructure. Like a highway for money. Our role is rather that of a municipal police force, not the police or prosecution. We are simply required to make sure the road network is in good repair. Transfers are checked before they are made and after. We report everything out of the ordinary.
And we report quite often. A triple-digit figure every year, almost four reports a day.
Therefore, even if you reacted immediately and reported suspicious transactions as per the rules in the cases described in the press, you cannot tell me.
Naturally. I can neither confirm nor deny it. An unfortunate position indeed. But I hope you understand.
This also means that the leak of bank statements at the heart of this matter is also in breach of client rights.
It is a massive breach. Clients have asked us whether it’s illegal when their statements end up in a mailbox at Riga railway station. Of course it is.
Is it possible that companies that have been named by the media do not even know how they’ve become involved in all this?
I believe so. Many are victims to circumstance. They sold some goods and got paid. While the money came from somewhere it was not originally supposed to come from, they received it and only later learned they were paid by a company associated with an international laundromat.
I’m worried for small companies. The anti-money laundering act states that companies must also verify their clients. But how can a company with just five employees run thorough background checks on its partners? Their primary goal is to survive, and that is where they must spend their resources. Who should be responsible? A bank cannot tell a company who it can do business with. We have opened a relevant discussion with the Estonian Chamber of Commerce and Industry.
Okay. It is difficult and often impossible to comment. However, this whole thing started with comments by CEO of Swedbank in Sweden Birgitte Bonnesen. The Swedish press has repeatedly called out Bonnesen’s hypocrisy. “We did not manage to find anything,” she said concerning statements up until 2007. Would you dare repeat her words?
Like I said, whenever a new leak or scandal appears, we need to verify it. I understand that saying “we did not find anything” sounds absolute. But in order for me to be able to comment or corroborate what she said, I would first have to know what it was about. As far as I know, Bonnesen said as much in February: that we will analyze any new information as it is made available.
Swedbank will publish the results of an audit that should shed light on conclusions from the recent scandal tomorrow. How many such audits have you had before? Especially those concerning high-risk non-resident clients?
We have had them before.
After every such scandal, I believe. I would like to point out the role of the press. I now know two abbreviations in my sleep: ICIJ (International Consortium of Investigative Journalists) and OCCRP (Organized Crime and Corruption Reporting Projects). The work they have done has changed the world.
Every such investigation or work causes us to go back and review our house in this new light. Because there have been quite a few such revelations, we have had cause to go over a lot of things.
There are also external audits. The Estonian Financial Inspectorate has promised to audit us. I would very much like it if this matter was over and done with, and we would know whether there were any shortcomings. I nope not. Then we would know whether how things look now is how they were.
Have any of these audits resulted in you dropping non-resident clients?
I cannot comment on that.
Swedish business daily Dagens Industri wrote that an external auditor pointed to “major breach of anti-money laundering obligations” at Swedbank Estonia earlier this year. The audit allegedly points to the possibility of corruption. Was there such an audit?
I have no such report. Dagens Industri will have to say where they got that information. While it hardly confirms or refutes anything, I can assure you that I have no knowledge of there having been violations of any kind.