The Estonian Financial Supervision Authority established in its investigations that SEB Pank had deficiencies in the collection of customer data plus in the identification of actual beneficiaries. There were also shortcomings in reporting money laundering suspicions to the FSA.

The precept and fines do not affect the bank's regular customers and it will continue to operate in Estonia as normal.

The FSA additionally said that the bank's management and staff exhibited a willingness to cooperate and a desire to eliminate the stated shortcomings.

During the course of its study, the FSA cooperated closely with its Swedish and Lithuanian counterparts, though supervisory procedures were conducted separately in those countries.

Swedish investigation

In Sweden, authorities examined the money laundering risk management with SEB's parent bank Skandinaviska Enskilda Banken AB, in respect of transactions in the Baltic States and also whether these requirements were complied with for transactions in Sweden itself.

Swedish FSA announced Thursday that SEB had not adequately assessed the money laundering risk in its Baltic units, and the authority has identified shortcomings in AML measures there.

The result was a 1 billion SEK (€96 million) fine for SEB's parent company.

The Swedish investigation covered the period from 2015 to the first quarter of 2019, and identified an increased money laundering risk in the bank's Baltic States' operations. The FSA also identified shortcomings in the risk assessment of foreign residents.

"Despite the increased risk of money laundering in the Baltics, the bank has done too little and too late," said Erik Thedeen, head of the Swedish FSA.

Estonian FSA investigation details

Estonia's FSA issued a precept to the bank, which obliges the bank to eliminate the deficiencies. For the reasons identified during the supervision procedure, the authority also initiated misdemeanor proceedings and imposed a fine of one million euros on the bank for deficiencies over the period 2017-2019.

"Since 2014, the FSA has sent a clear message to banks that they must have control systems which comply with internationally agreed anti-money laundering standards. Our task is to inspect banks' systems and respond to weaknesses. We identified shortcomings in AS SEB Pank and we decided to issue a precept and impose a fine," said Kilvar Kessler, FSA board chair.

• August 26 to September 27 2019, the FSA conducted a comprehensive on-site inspection whose report was prepared on this basis, and assessed the money laundering prevention systems and controls at AS SEB Pank and the activities of the Management Board as of August 25 2019 and the time leading up to that.
• On January 28 2020, the FSA initiated misdemeanor proceedings against AS SEB Pank, which led to the fine.
• The bank was found to have breached the obligation to register and retain data between November 2017 and September 2019. Over the same period, requirements regarding the application of due diligence measures in identifying the beneficial owner or monitoring the business relationship were not complied with, and the reporting obligation in case of suspicion of money laundering and terrorist financing was not complied with, it was found.
• SEB must eliminate the deficiencies identified no later than within six months of receipt of the precept. If after this period the bank has not fulfilled the obligations provided for in the precept, or has performed them improperly, the FSA has the right to impose a penalty payment of €32,000 on the bank and €100,000 for each subsequent same or similar violation.
• SEB can file an appeal against a misdemeanor decision within 15 days from the date of receipt of the decision.

SEB response: We will eliminate deficiencies within six months

SEB said that it had not been found that the bank had been systematically used for money laundering or terrorist financing, despite being ordered to eliminate shortcomings in the collection of customer data and monitoring of business relations.

"SEB has done and will continue to do everything in its power to prevent its use for criminal purposes, and our conservative strategy has been effectively implemented in the bank's processes and systems," said Allan Parik, board chair at SEB Pank.

Parik also hinted at positive aspects to the procedures and findings.

"Supervisory audits have helped us further develop our processes an AML and anti-terrorist financing," he said.

The bank also says that the audit has confirmed that it has a clear business strategy and low-risk approach when servicing non-residents, which is also reflected in small business volumes, as well as the fact that it has controls and systems in place to implement this more conservative business strategy.

"We confirm that improving the quality of customer data and monitoring processes is one of SEB's priority areas in which we are investing at an increasing rate each year," Parik went on, promising that this would be addressed within the six-month period.

SEB announced in mid-November 2019 that it had been contacted by Swedish public broadcaster SVT's investigative news program Uppdrag Granskning, in connection with a report in an upcoming TV program on suspected money laundering, in other words pre-empting the show's broadcast. The volumes of potentially illicit funds have been estimated at tens of billions of euros.

Issues at SEB come on the back of two major money laundering scandals which hit two of its Scandinavian competitors. An earlier SVT investigation in March last year claimed that within a 10 year period, around €135 billion in high-risk money moved through the Swedbank's Estonian branch. The prosecutor's office launched an investigation into Swedbank Estonia last year.

Danish-owned Danske Bank was forced to close its operations in Tallinn late last year, after investigations revealed that as much as €160 billion in potentially illicit funds had passed via the bank 2007-2015.

All three Baltic States are seen as risk areas for potential money laundering, primarily due to their proximity to the Russian Federation and other former Soviet states.

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