What is the background to the claims made by Uppdrag granskning?
Uppdrag granskning has reviewed 194 names, which SEB has also received. The names on the list from Sveriges Television are covered, in all material respects, by the bank’s own analysis where approximately 95 percent of the customer relations are terminated. When SEB has discovered suspected activity, this has been reported to relevant financial police. SEB works continuously to ensure that SEB’s customers live up to the bank’s requirements.
SEB’s ability to prevent, detect and report suspected financial crime has strengthened over time. The regulatory framework has been tightened, awareness has increased and the bank’s routines, processes and systems have improved. SEB is doing its utmost to prevent that the bank is exploited for financial crime. Nevertheless, SEB cannot guarantee that the bank has not been or will not be exploited.
What has SEB done historically in the Baltics to reduce the risk of money laundering?
SEB has been working in a structured and determined way, in order to reduce the risks of being exploited in money laundering purposes in the Baltic countries. Following criticism from the Estonian Financial Supervisory Authority and information from another external source in 2006, the bank adopted several decisions and measures. A large number of customer relations were terminated and SEB continuously terminates customer relationships and reports suspicious activities to relevant financial police.
Although SEB has lived up to the regulatory requirements, given what we know today we can conclude that neither regulations nor the banking system’s ability have been sufficiently efficient to handle risks of money laundering historically. However, since then the regulations have tightened, awareness has increased and the bank’s routines, processes and systems have improved. SEB is doing its utmost to prevent that the bank is exploited for financial crime. Nevertheless, SEB cannot guarantee that the bank has not been or will not be exploited.
What have you looked at in your review of the Baltic operations?
SEB’s comprehensive review covers the bank’s customers, transaction volumes, processes, systems and risk culture during the period 2008-2018, complemented with data from 2005-2007. This also serves as the base for the statements issued by the bank. The analysis confirms that, since 2006, SEB has taken significant steps to reduce the risk of being used for money laundering in the Baltic countries. Still, at any given time, all banks are subjected to the risks that financial crime entail.
What is your view on non-resident customers? That is, customers who are not based in the country where they are customers?
The absolute majority of SEB’s customers are based in the country where they are customers. However, SEB can accept customers who are not based in the country if there is a logical connection to it. The requirement for a logical connection to the country has been in place for a long time but have gradually tightened over the years. On several occasions since 2006, SEB has taken action to terminate customer relationships that have not been in line with the bank’s strategy.
What does SEB mean when saying that it has not been systematically exploited for money laundering?
SEB’s comprehensive review covers the bank’s customers, transaction volumes, processes, systems and risk culture during the period 2008-2018, complemented with data from 2005-2007 and the bank’s statements are based on these reviews. We have based our statements on our internal analyses and have concluded that SEB has not had a mission to attract customer with high risk of money laundering. The proportion of high-risk customers has been limited and has decreased over the years through active decisions made by the bank. Earnings from these customer has also been very limited and has fallen over time.
SEB has conducted comprehensive work with the bank’s risk culture including high standards of corporate governance, regulatory compliance and risk management, strong values and continuous training for all employees. We can also see that SEB has acted on the signals received from, for example, authorities and that the bank has reported suspected money laundering. Over the last ten years, SEB in the Baltics has reported approximately 6.000 suspected cases to the financial police. In our internal analyses, we have concluded that in some cases we could have reported more or terminated customer relations faster, but we have not found that SEB has had systematic deficiencies. Overall, the bank has had functioning systems, routines and processes to counteract money laundering and has a declining trend in exposure to such risks. Still, at any given time, all banks are subjected to the risks that financial crime entail.
How did SEB handle the information from Andrej Kozlov?
In 2006, SEB Estonia received information from an external source, Andrej Kozlov, who was then Russia’s Deputy Chair of the Central Bank. After receiving this information, combined with criticism from the Estonian Financial Supervisory Authority that same year, SEB took several active decisions in order to reduce risk exposure related to money laundering. A large number of customer relationships were terminated, and suspicions were reported to the financial police.
SEB has on several previous occasions stated that the information the bank received from Andrej Kozlov in 2006 contributed to the bank’s work to strengthen its resilience towards financial crime and money laundering.
Uppdrag granskning claims that SEB is now pulled into the so called Magnitsky case, is it true?
SEB screens customers, beneficial owners and transactions in relation to the Magnitsky Act. SEB cannot see that we have had any of the Magnitsky labelled companies as customers.
Uppdrag granskning has reviewed 194 names, which SEB has also received. The names on the list from Sveriges Television are, in all material respects, covered by the bank’s own analysis where approximately 95 percent of the customer relations are terminated. When SEB has discovered suspected activity, this has been reported to relevant financial police. As new names become known, SEB has included this information in the ongoing work to combat financial crimes.
SEB CEO says in the programme that he cannot see “any red flags”. What does he mean by that?
These quotes are taken from a press conference from the third quarter 2018, where SEB’s CEO Johan Torgeby describes SEB’s cooperation with authorities against money laundering. The quotes about red flags that Uppdrag granskning refers to in the program are taken out of context. To understand what this is based on, one needs to go back to SEB’s presentations in relation to the third quarterly report 2018. The full quote and context is:
”In addition to what we do ourselves we have external authorities and our internal investigation (internal audit). In Estonia, we have since 2008 conducted 21 money laundering related reviews with the Estonian Financial Supervisory Authority and nine independent internal reviews and we have no red flags.”
A bit later, during the same press conference, Johan Torgeby also talks about another kind of red flags that the bank has found and finds all the time, related to trading monitoring:
”In addition, we also have high ambitions when it comes to using new technology. We handle millions of transactions all the time and it’s not possible for the human eye to process that much information. So, with new technology we have something called suspicious trading monitoring, through which we get a plentitude of red flags when you see something improper that can happen. The problem with using technology is that you get what we call false positives – you get a large number of signals that actually was a proper transaction by a proper person. Nonetheless, it’s very important to spend more on this, invest in and improve, especially now when there is so much interesting technology to improve this with.”
At the customary teleconference with analysts after the press conference, where Johan Torgeby always does a summary of what has been said at the press conference, Johan Torgeby refers back to that presentation. He focuses mainly on whether the issue in SEB can be equated with that in Danske Bank. In the teleconference, he says that he feels comfortable with how SEB has acted from 2008 up until today and that he does not see any red flags to worry about in comparison to the situation in Danske Bank or in relation to the reviews conducted by authorities. The quote in full and the context is:
"Okay. Then I think I could just address the Estonian money laundering and the cum-ex. I think I'll do a fairly short version of what we did this morning, and then you can just ask follow-up questions. But the short story on AML money laundering in Estonia is really driven about the general interest for parallels being searched for, subject to the Danske Bank situation. And I think most banks, including ourselves, and the 2 others in this part of the world who are active has gone out with similar data to say, it's really not for us to be worried about. So we feel very comfortable that what we've done from 2008 up until to-date doesn't have any real red flags we need to worry about in the comparison.”
The presentations in full can be found at https://sebgroup.com/investor-relations/reports-and-presentations/financial-reports
The quote about red flags should not be taken out of its context. It should be viewed in light of SEB’s overall communication over time on this issue.
As a bank, we have a responsibility to continuously monitor transaction patterns, and in this work we constantly find deviations which we handle and report to the financial police when there is suspicion of money laundering. That we identify these deviations is a sign that SEB has well-functioning systems, routines and processes. Over the last ten years, SEB in the Baltics has reported approximately 6,000 suspicious activities to the financial police. This is not to be mixed with being systematically exploited for money laundering. In the comprehensive analysis that we have made of our historical operations in the Baltics, we have not seen that SEB has been systematically exploited. Still, at any given time, all banks are subjected to the risks that financial crime entail.
SEB CEO says in the programme that SEB only works with its home markets and that your corporate customers must come from the part of the world where you are situated. What does he mean by that?
The quote originates from the press conference for Q3 2018, where Johan Torgeby talks about the bank’s business model of today. The requirement that customers must have a logical connection to the country has been around for a long time and has increased over the years. On several occasions since 2006, SEB has taken action to terminate customer relationships that have not been in line with the bank's strategy.
It is also important to note that so called non-resident customers does not equate to customers suspected for money laundering. Non-resident customers refers to customers who reside in a different country – including for example Nordic companies with local branch in the Baltic countries.
Here is Johan Torgeby's quote in full:
"SEB’s business model revolves around having only customers, our corporate customers, in our home markets. And they are in Sweden, Norway, Denmark, Finland, the Baltics Germany and the UK. The absolute majority of all flows we have that are not Estonian come from subsidiaries in the region with parent companies in one of these countries, and this is what we do. We are also, unlike some other banks in the region, primarily a corporate bank which means that we have more international flows than a primarily retail bank or a bank for private individuals that is far more domestic in nature, and that to a large extent explains some differences.”
Read SEB’s earlier press releases about this issue:
From 15 November
From 19 November
From 26 November
Read more about how SEB works to combat money laundering