Photographer: Freya Ingrid Morales/Bloomberg

Nordea Money Laundering Link to Panama Leaks Probed by FSA

Updated on
  • Swedish FSA says `same problems' may be behind both issues
  • Nordea called on to testify in Danish tax committee hearing

Questions surrounding Nordea Bank AB’s role in allegedly helping clients hide their wealth from tax authorities are being tied to the lender’s earlier failure to comply with money laundering rules.

Uldis Cerps, executive director for banking at the Swedish Financial Supervisory Authority, says revelations in the so-called Panama Papers about Scandinavia’s biggest bank “potentially point to the same problems.” The comments come as Nordea on Wednesday answered questions during a hearing with the Danish parliament’s tax committee as lawmakers respond to allegations the bank may have helped clients evade taxes.

Nordea has fielded a growing barrage of questions from shareholders, lawmakers and its regulator after files leaked from Mossack Fonseca showed the bank used the Panama-based law firm to create shell companies for clients to hold offshore accounts. Casper von Koskull, the bank’s chief executive officer since November, says Nordea has now severed all ties with Mossack Fonseca. He also said the revelations left him “mad” and “disappointed.”

Major Deficiencies

Back in 2015, Sweden’s FSA found “major deficiencies” in Nordea’s efforts to prevent its services being abused by potential criminals and terrorists eager to cover up their financial tracks. The bank received the maximum fine that could be charged for such breaches, which was 50 million kronor ($6.1 million). The FSA said at the time it had “no doubts” Nordea would live up to its regulatory obligations in the future.

The question now is whether Nordea and Svenska Handelsbanken AB, which was also caught breaching money laundering rules last year, are in fact following the rules, Cerps said. “We are interested to see whether those banks now, a year after the sanctions, are fully compliant.”

Scandinavia has been unsettled by evidence that a region associated with low corruption and high transparency has figured so prominently in the Panama leaks. The revelations have already led to the resignation of the prime minister of Iceland and an apology from the CEO of DNB ASA, Norway’s biggest bank.

Nordic Indignation

Until recently the concept of money laundering wasn’t even included in Sweden’s penal law, according to a 2015 government report. But ill-gotten funds equivalent to almost one-fifth of Sweden’s $570 billion economy are laundered each year in the Nordic country, the FSA estimates.

Revelations of fraud and tax evasion have triggered deep indignation in a region known for enforcing high tax rates to pay for its fabled welfare model.

“It’s very important that we don’t have free riders,” Carina Lundberg Markow, head of corporate governance at Folksam, which owns shares in Nordea, said by phone. “It’s not acceptable to avoid taxes with the help of one of Sweden’s largest banks.” Investors have been taken aback because the scale of allegations against Nordea “was very surprising,” she said.

For now, Folksam will remain a shareholder in Nordea, “but we want them to deliver,” Markow said. That includes providing transparent updates to the market on the case, she said.

Nordea says it has no evidence it has done anything illegal, though the deluge of criticism from media and shareholders has forced the bank to respond to allegations of unethical conduct. Von Koskull has vowed to make compliance a top priority for the bank.

But with financial conglomerates spanning several operational and geographic areas, it’s growing more difficult for executives to know what’s going on inside their banks. Cerps says the Panama leaks point to the financial industry’s “potentially insufficient knowledge of customers.”