15 Jul 2020 07:15

SEB comments on the Swedish Financial Supervisory Authority's sanction decision

SEB has analysed the Swedish Financial Supervisory Authority's (FSA) sanction decision of 25 June regarding the bank's routines and processes to counter money laundering in its Baltic subsidiary banks, which resulted in a remark and an administrative fine. SEB here provides its overall assessment of the decision.

SEB's ambition is, and has always been, to adhere to current regulations and the bank's own internal requirements as well as having a high standard for corporate governance, regulatory compliance and risk management. One part of this work is to continuously identify possible improvements in order to continue to strengthen the bank's abilities.

SEB notes the observations made by the FSA, many of which the bank itself has identified over time, continuously reported to the FSA, and addressed contemporaneously. SEB, however, disagrees with the conclusions that the FSA has drawn from those observations about the bank's governance and control over AML measures in the Baltic subsidiaries. SEB further notes that the FSA in its decision concludes that the deficiencies have not been severe, though not negligible either. The FSA notes that SEB already has taken measures, and plans to take further measures, to strengthen the bank's resilience. SEB assesses that these measures can be accommodated within the previously communicated 2021 cost target and are to a large extent already included in the bank's business plan.

Furthermore, the FSA has not ordered any additional improvement measures that the authority deems that SEB needs to take in relation to its Baltic subsidiary banks. SEB also wants to highlight that the actual money-laundering risk in the Baltic subsidiary banks has been low and declining during the review period, which has been confirmed in the Baltic supervisory reviews that have recently been published.

The FSA has also stated that SEB does not want to take responsibility for its Baltic subsidiary banks. This statement is incorrect and does not take into consideration the responses that SEB has provided the FSA with. The objections that SEB has expressed in its answers to the FSA in this matter are solely about the legal ground for and legality in the FSA's view of a parent company's subsidiary responsibilities. This should not be confused with the practical responsibility that SEB has taken, takes and will continue to take for its subsidiaries.

Against this background, SEB questions the proportionality between the considerations that the FSA presents and the authority's decision to issue the bank a remark and an administrative fine of SEK 1bn. Although the fine represents 14 percent of the maximum amount the FSA can issue, SEB does not share the FSA's view that the amount is moderate.

Despite the fact that SEB does not agree with the FSA's decision in all parts, the bank has after an overall assessment decided not to proceed with an appeal. Firstly, there is a lack of clarity in the legislation, and secondly, there is a risk that the process becomes protracted. SEB believes that the bank creates more value for its shareholders, customers and employees by instead focusing on the continued development of the bank's abilities to counter money laundering and on other parts of the bank's operations, such as the work with digitalisation and increased focus on sustainability. SEB will work together with the FSA to clarify any outstanding ambiguities in the continued dialogue with the authority.

SEB's work to strengthen the defenses against money laundering will continue to have a high priority, for the parent company as well as for the bank's subsidiaries. As crime constantly finds new ways to exploit the financial system, the bank's defenses against these crimes must be strengthened on an ongoing basis. SEB is continuously adding resources, improving the bank's know-your-customer process, and developing the transaction monitoring. Additionally, SEB continues to deepen the cooperation that has been initiated with other banks, the financial police and supervisory authorities regarding improved information sharing. By extension, SEB's work against financial crime is about continuing to earn the shareholders' and the customers' trust – and about contributing to strengthening the resilience of the entire financial system and society at large.