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Birgitte Bonnesen, the chief executive officer of Swedbank AB, has consistently denied that her bank had any involvement in the Estonian money-laundering scandal engulfing Danske Bank A/S.
This week, her words came back to haunt her.
Swedbank was forced to backtrack on its previous assertions and has now acknowledged that it also handled suspicious transactions, which it says have been reported to the police.
The admission follows a report by Sweden’s main broadcaster, SVT, alleging that the bank helped transfer $4.3bn in illicit funds from Danske Bank between 2007 and 2015.
Bill Browder, the investor best known for chasing money launderers, says he also has evidence directly linking Swedbank to the Danske scandal. Browder says a claim by Bonnesen that he’s assured Swedbank he won’t file a criminal complaint is "not true".
The sequence of events unnerved investors, and Swedbank lost more than a fifth of its market value as the news broke this week. For now, the bank’s board has stood behind the CEO, with Chairman Lars Idermark saying he "absolutely" thinks Bonnesen should continue in her role.
But others are less convinced.
"Bonnesen’s communication strategy has been beyond all criticism," said Joakim Bornold, a savings adviser at Soderberg & Partners, which helps Swedish retail investors decide where to put their money.
At Swedbank’s third-biggest shareholder, Alecta, head of ownership Ramsay Brufer says that they "welcome the bank’s decision to have an independent review of the events. The important thing now is to let the investigation take its time, that it’s handled in a professional way and that all information comes forward".
Swedbank’s plight comes as a $230bn dirty-money scandal dragging down Danske Bank continues to spread. Danske is accused of letting a tiny branch in Estonia become a hub through which illicit funds from the former Soviet Union made their way to the West.
The bank is being investigated by the United States Justice Department and the Securities and Exchange Commission, among others, and investors are bracing for fines, potentially of billions of dollars.
Browder has consistently made the point that Danske wasn’t alone. "What’s emerging is that a good part of the Nordic banking system has been used by Russian money launderers and neither the regulators nor the banks did anything about it for many years," he said.
Stefan Ingves, the governor of Sweden’s Riksbank, hinted that banks operating close to the Russian border are putting themselves at risk.
"Given the history in the Baltic countries and their geographic location, one has to be aware that you’re not too far away from some bad guys," he said in an interview with Swedish newswire TT on Friday.
Bornold says it’s positive that Swedbank, which is the biggest bank in the Baltic region, has now started an independent investigation to get to the bottom of the matter but warns that that’s not enough to regain investors’ trust.
After two days of steep losses, Swedbank’s shares gained on Friday. But "the danger is far from over," Bornold said. "Be prepared for a really bumpy ride that can still end in the ditch".
The Swedbank CEO, who ran its Baltic operations between 2011 and 2014, says her responses have been consistent. She points to the bank’s efforts to catch and report any suspicious behavior.
Bonnesen also says that the kind of non-resident accounts that tend to be associated with suspicious flows are negligible at her bank. When asked by Swedish media this week whether she should step down, Bonnesen said she didn’t understand the question.
Swedbank is now being investigated by regulators in Sweden and Estonia. Bonnesen says the bank is cooperating with the authorities.
It’s worth noting that a year ago, Danske Bank was fielding similar questions before the full scale of its scandal was known.
Thomas Borgen, who was CEO until being forced out in October, was told he had the full confidence of the board to continue running the bank until shortly before he announced his resignation.
Meanwhile, Swedbank’s choice of EY to review the allegations against it has raised eyebrows.
Because of its role as an auditor for Danske Bank, EY itself became the target of a Danish investigation last year for failing to identify signs that the Estonian branch of Denmark’s biggest lender was being used for money laundering over several years.
Sweden’s Financial Supervisory Authority declined to comment, as did Swedbank spokesman Gabriel Francke Rodau. Calls to EY seeking comment weren’t immediately answered.
Since the news surrounding Swedbank broke on Wednesday, investors have panicked. Efforts by Bonnesen to calm markets late on Wednesday backfired when analysts said she left them with more questions than answers.
Meanwhile, a number of senior people at Swedbank have been buying thousands of shares in the lender.
These include board members Ulrika Francke, Bo Johansson and Anna Mossberg. Ola Laurin, head of large corporates and institutions, and Anders Ekedahl, head of group IT, also bought shares in their bank since Wednesday. Swedbank shares rose almost 5% on Friday.
'Suspicious transactions'
Revelations of money laundering at some of the biggest Nordic banks have reshaped a financial industry with close ties to the Baltic region. Danske was kicked out of Estonia on Tuesday, prompting Denmark’s biggest lender to announce a complete withdrawal from the Baltic region and Russia.
Browder, who is chasing a trail of money that can be traced back to the death of his former colleague Sergei Magnitsky, warned that allegations against Swedbank are likely to be "just the beginning" of the case.
Read More: Browder Says He Has Evidence Linking Swedbank to Danske Case
The laundering scandal has already been costly for Danske, even before prosecutors reveal how much the Danish institution faces in fines. The bank’s share price has plunged about 50% over the past year, wiping more than $18bn off its market value.
