A trove of money laundering scandals erupted in Northern Europe this year, tying major financial institutions from all three Scandinavian countries to alleged bribery schemes, attempts to evade U.S. sanctions, and serious regulatory failures. As the Northern European financial landscape is rapidly engulfed by investigations led by authorities in both the United States and the respective home countries, it begs the question: were these Scandinavian banks uniquely susceptible to be used as conduits for money laundering and bribery or, to the contrary, is the active enforcement simply exposing the possibility of widespread vulnerability in global financial institutions?
Just last week, on November 29, the Norwegian government announced that it had begun investigating DNB ASA, an entity in which it holds a 34.3 percent stake, for its role in channeling illicit funds to Namibian officials as bribes in exchange for increased fishing quotas in the country’s territorial waters. It is the third major bank in Norway, Sweden, and Denmark to face serious questions regarding the institutions’ handling of funds.
Danske Bank, the largest bank in Denmark, admitted earlier this year that its Estonian subsidiary helped thousands of its customers launder tens of billions of euros as it ignored warnings about the suspicious nature of the transactions.
Likewise, authorities allege that Swedbank, which is headquartered in Stockholm, Sweden, helped to launder as much as $23 billion since the start of the decade. News reports indicate that most of those illicit funds came from Russian sources.
The Danske Bank and Swedbank investigations began when authorities dove deeper into money laundering allegations stemming from the activities of the banks’ Estonian subsidiaries, but the scope of both investigations have since expanded substantially. The Swedbank investigation now includes alleged links to Sergei Magnitsky, a Russian lawyer who died in custody after investigating tax fraud, and to deposed Ukrainian President Viktor Yanukovych.
Further complicating matters, Swedish state broadcasters reported last week that Skandinaviska Enskilda Banken AB (SEB) is also suspected of enabling the laundering of around $50 million linked to the Magnitsky case through its Swedish and Baltic accounts. SEB may yet be the latest Scandinavian bank dragged into the morass.
For Danske Bank and Swedbank, its chief executives could not weather the storm: both were ousted as a result of the brooding scandal. That said, given the extensive cooperation DNB ASA has offered the Norwegian authorities, it is not immediately clear its own chief executive will suffer the same fate.
Perhaps both as a precautionary and reactionary measure, the Nordic region’s six major banks founded a customer checking center in July, a joint Know-Your-Customer (KYC) registry to combat financial crimes and centralize compliance efforts. In addition to the four banks discussed above, the coalition includes Handelsbanken (Sweden), and Nordea (Finland).
Notably, the Nordic KYC platform is not unique. There were, for example, recent launches of Afreximbank’s Mansa platform to monitor customer data for counterparties in Africa and CordaKYC to serve as a consolidated blockchain platform for nearly 40 institutions in 19 countries.
These multilateral efforts of course indicate that Scandinavian banks are not the only entities that seek to face head-on the vexing issue of conducting customer due diligence.
I turn back to my original question: What made the Scandinavian banks so attractive for money laundering purposes? I do not seek to profess the answer. But my first instinct is to note that the problem is not unique to Scandinavia. Shedding daylight on the illicit practices does not mean the banks discussed above are outliers. Rather, the rapid exposure of the illegal activities in the Scandinavian financial institutions, both alleged and proven, indicates that substantial steps are being taken to eradicate money laundering in the region. Surely, then, we must hope that other regions will follow suit with similar enforcement actions — as the problem certainly persists in other places as well.