Money Laundering
Introduction
Money laundering is a tendency common with many banks. For instance, one of the oldest banks in Sweden came into the global financial limelight with reasons of money laundering allegedly orchestrated by its administration. The suspicious transaction findings confirmed by Estonian authorities revealed how the amount was transferred through Danske bank, which is now on the investor’s radar. Countries such as Britain, the US, Estonia, Britain Denmark, and France have a collaboration to un-earth the masterminds of these vice (Younas, Arshad and Hasina, 2012)
Investigation on the Case of Swedbank
The investigation showed that between the years 2007 to 2015, at least 40 billion Swedish crowns had been transacted in accounts between Danske and Swedbank in the Baltics (Younas, Arshad and Hasina, 2012). The action took a toll order on its operation, resulting in a massive financial loss as well as its image being tainted. Besides, the financial giant saw many of its administrators fired. In March 2019, chief executive officer, Birgitte Bonnesen was fired, followed by unprecedented resignation of its chairman Lars Idermark a month later. Cognizance of these occurrences, Swedbank took drastic measures by immediately appointing Anders Karlsson as the acting CEO (Younas, Arshad and Hasina, 2012). Anders came to the fore admitting that the previous investigations were marred with shortcomings. According to him, some customers who were cited in the last preliminary report had not been flagged raising questions on the integrity of the investigators. “For Swedbank to deserve the trust of customers, authorities, investors, employees, and other stakeholders, continues improvement in our anti-money laundering work is required” (Bjerregaard & Kirchmaier, 2019). The bank is optimistic that the ongoing internal probe will unearth the customer’s history as regards money transactions, albeit it’s Baltic departments. Besides, various platforms such as anti-money laundering processes and previous internal reviews will help in laying bear the truth. Karlsson is of the view that the internal investigation will unearth the happenings of the past and probably learn from it (Bjerregaard & Kirchmaier, 2019). He further points to the fact that the processes will the bank manage various authorities’ concerns in a better way.
Estonia, one of the investigations state, revealed that it is dealing with the most sophisticated case ever to be graced in its law courts. This comes in the wake of the information that Danske and Swedbank were used as pipelines to swindle and funnel billions of dollars into the west. Danske risks liquidation as it ponders on the move to exit from Estonia based on the financial supervisor orders. According to Swedbank management, the ongoing investigations into the money laundering scandal has revealed that so far, there was no indication of criminal activities in the company (Bjerregaard & Kirchmaier, 2019). It, however, remains to be seen what the investigators will come up with considering that due court processes have to be followed.
To further dig dip into the occurrence of the money laundering case, Clifford Chance law firm was given the mandate to conduct investigations. The move was also supported by the involvement of forensic experts from FTI and FRA (Bjerregaard & Kirchmaier, 2019). So far, Swedbank has received the report, consequently putting it on the website. The report underlines the bank’s effort to handle both internal and external information as far as the case is concerned. The law firm investigation includes money transaction activities that allegedly took place between 2007 and March 2019. Swedbank shareholders made an extraordinary meeting by February 28th, 2018, to liquidate the bank voluntarily. The decision was reached due to the following events:
- Planned ABLV ban from possessing correspondence account in the USA because of money laundering by FinCEN
- Payment restrictions temporarily imposed by the ABLV bank supervisor
- Failing to take any action by the SRB (Single Resolution Board)
- Implementation of the plans for voluntary liquidation with the control of FCMC
Vulnerabilities of Banks to Money Laundering
Financial firms, especially banks, face high risks of its money being laundered in many ways. Thus, banks are put on the spot to explain and identify the source of funds said to be funding illegal activities such as terrorism. Every bank has installed a detective system known as Anti-money Laundering (AML) (Dalla et al., 2017). However, most organized criminals are known to interfere with the operation creating every loophole and capitalizing on it. They continuously invade the system, hence making it a cash cow to the banks’ disadvantage. These vices are engineered by organized criminal gangs, internet gangs, and in-house theft (Younas, Arshad, and Hasina 45). Complex web characters characterize the syndicate, domestic payments, businesses, oversees wires, which makes banking sectors more vulnerable to money laundering. Besides, low-income earners will deposit a small amount of money while keen on making sure that they are not detected. When the amount reaches a certain volume level, organized criminals channel these aggregated monies overseas. It is a complicated move aimed at frustrating investigations and suspicions (Bjerregaard, Elisabetta, and Tom 16). In the end, banks find it difficult to follow up transaction monitoring systems, thus incurring unnecessary losses. The inefficiencies of anti-money laundering systems and their inflexibility can lead to degradation of the bank’s performance hence throwing them into financial turmoil (Dalla et al., 2017).
Preventing Money laundering
Financial crime remains prolific issue banks are struggling to combat. Banks have learned so many lessons from various alleged money laundering scandals. For example, the entry of level analytics supported by modern technology has improved efficiency hence making it useful to detect any malicious movements. Moreover, the introduction of intelligence analytics intertwined by a reliable network has seen affected banks normalize their operations.
Ultimately, money launderers are individuals and companies who make illegal transactions using fake accounts or maximizing the loopholes of the banks’ systems (Dalla et al., 2017). Therefore, tightened security measures have to be deployed so that people who exhibit this vice are put on notice. For instance, Swedbank instituted means of detecting money laundering called traceability transactions such that all customers are recorded to the bank database. According to the current CEO, business transactions, regardless of the amount, are marked for easy traceability besides finding its originality (Colladon & Remondi, 2017).
Apart from that, persons authorized to represent the bank in appending signatures in case of any business engagement must be honest (Colladon & Remondi, 2017). In this regard, they must identify themselves by showing valid IDs. Conversely, they must have carefully scrutinized their parties so that they can transact any business on behalf of the bank. In case the customer did not provide the relevant information concerning the identity, banks are advised to halt their relationships with such client
Conclusion
Since money laundering allegations have been rampant, banks are on the record of repeatedly distancing themselves from the theft syndicate. However, they should remain loyal to the investigation authorities to assist curb the vice, as indicated by Jourová (2018).
References
Bjerregaard, E., & Kirchmaier, T. (2019). The Danske Bank Money Laundering Scandal: A Case Study. Available at SSRN 3446636.
Colladon, A. F., & Remondi, E. (2017). Using social network analysis to prevent money laundering. Expert Systems with Applications, 67, 49-58.
Dalla Pellegrina, L., Di Maio, G., Masciandaro, D., & Saraceno, M. (2017). Vulnerability to Money Laundering and Crime Deterrence: Evidence from Italy. BAFFI CAREFIN Centre Research Paper (2017-66).
Jourová, V. (2018). Strengthened EU rules to prevent money laundering and terrorism financing. European Commission.
Younas, A., & Jan, H. (2012). The Impact of Service Recovery on Customer Loyalty (Case company: Swedbank).