Swedbank has reached an agreement to pay a sum exceeding $3.4 million in order to settle allegations that its Latvian subsidiary was involved in processing transactions that violated U.S. sanctions imposed on Crimea. The settlement, which was made public on Tuesday, was reached with the U.S. Treasury Department's Office of Foreign Assets Control. This represents one of the initial resolutions that Swedbank, headquartered in Stockholm, has achieved with U.S. regulatory authorities concerning its deficiencies in anti-money laundering practices within the Baltic region, where the bank holds a substantial presence.
In response to the settlement, Swedbank issued a statement on Tuesday acknowledging that investigations by the U.S. Justice Department, the Securities and Exchange Commission, and the New York State Department of Financial Services are still ongoing. The bank further stated that it is engaged in separate discussions with these regulatory agencies to address the matter at hand.
The U.S. Office of Foreign Assets Control (OFAC), responsible for implementing and enforcing U.S. sanctions, made allegations that Swedbank's Latvian subsidiary had a client in the shipping industry based in Crimea, utilizing an internet protocol address who used Swedbank's e-banking platform to conduct payments to individuals in Crimea between 2015 and 2016. These transactions were processed through correspondent banks in the United States.
According to OFAC, the client initiated approximately 386 transactions during that period, with a total value of around $3.3 million.
In 2014, Russian forces seized the Crimean Peninsula from Ukraine and subsequently annexed the territory, a move widely regarded as illegal by the U.S. and most other countries. In response, the U.S. imposed a comprehensive ban that prohibits U.S. citizens and companies from engaging in business activities within the breakaway Crimea region.
The jurisdiction of U.S. regulators, in this case, stems from the involvement of U.S. correspondent banks that Swedbank utilized to process these transactions.
According to Swedbank's statement, the bank reported the transactions to OFAC in March 2020. These transactions primarily involved salary payments and payments related to the operation of a vessel, which had its owner and operator based in Crimea. In anticipation of the settlement with OFAC, Swedbank had set aside approximately 40 million Swedish kronor, equivalent to around $3.7 million, in March.
Tomas Hedberg, Swedbank's deputy president and deputy chief executive, emphasized the bank's commitment to addressing its historical shortcomings and the extensive efforts undertaken to enhance internal governance and control.
Swedbank faced scrutiny in February 2019 when a Swedish TV broadcaster alleged that the bank's Estonian branch might have been involved in the potential movement of billions of dollars in illicit funds, predominantly linked to Russia. Following the airing of the report, Swedbank's CEO Birgitte Bonnesen was terminated just over a month later following a police raid on the bank's headquarters.
In October 2021, Swedbank implemented a governance change at its Baltic operations aimed at enhancing accountability and responsibility within the Baltic banking management. Swedbank Baltics, a wholly-owned holding company, became the owner of Swedbank's subsidiary banks in Estonia, Latvia, and Lithuania.
Additionally, the bank hired a new chief compliance officer in the past year as part of its ongoing efforts to address investigations conducted by multiple agencies across various countries.
