By Sandra Nebritova
Last week, the Swedish Financial Regulator issued yet another fine to SEB Bank – worth 1 billion Swedish Krona (€95.2 mln), one of the biggest fines in the regulator’s history.
The fine is based on the results of investigations into the bank’s operations in the Baltic states – Latvia, Lithuania, and Estonia.
This is not the first time SEB Bank is in hot water with the regulators.
In December 2019, the bank received a fine of €1.79 mln from the Financial and Capital Market Commission of Latvia and the reasons for the fine were quite similar – deficiencies in the anti-money laundering controls and sanctions violation.
So, what was happening behind the scenes?
The Swedish regulator stated several problems.
One of them, that the bank has insufficient resources for monitoring clients and transactions.
This means that either the systems used by the bank created too many alerts or not enough – due to incorrect risk calculations.
This also might mean that the bank did not have sufficient staff to process all the necessary work.
Another reason mentioned was a large number of their clients were non-residents or residents with non-resident beneficiaries.
Those relationships should have gone through a scrutinised due-diligence process and risk assessment.
Failing to apply all the necessary controls left the operations exposed to money-laundering.
While there is no crime in onboarding non-resident clients, there are particular risks associated with it.
Therefore, such relationships, require more analysis, additional documentation and, of course, time.
Opening an account for a resident might take less than a week, but for non-residents, it may take even longer than a month.
Cyprus found itself in a similar situation not so long ago, when all the banks started reviewing their existing relationships with non-residents and applying additional controls and requirements for such accounts.
This clean-up ended up with a huge number of accounts being terminated, as the banks simply did not want their customers’ risk to be tipped too high.
It became much harder to open corporate accounts, sometimes, even impossible. This especially affected Russian businesses on the island.
Obviously, excluding such clients, who are quite often high-net-worth, is a loss for banks.
But, surely, it is better than receiving huge regulatory fines and tainting the reputation of the financial institution.
Sandra Nebritova is a Certified AML Specialist