Money laundering scandals of high profile European banks during the first half of 2020

By Christina Poursanidou, Lawyer / Legal and Compliance Officer 

During 2019, the total number of fines imposed globally for violation of money laundering regulations was estimated to €370 million. Strangely enough, such fines did not worry bank CEOs and boards, which instead of improving their anti-money laundering (AML) procedures, keep on operating with insufficient due diligence standards, improper management of AML measures and  poor transaction monitoring. The result?  €600 million in AML monetary penalties within the first six months of 2020.

Within the context of the European Union, during 2020 National Financial Supervisors have imposed heavy fines to a number of credit institutions, such as Skandinaviska Enskilda Banken AB , known as SEB  (€125 million), Deutsche Bank (€13.5 million), Commerzbank (€41 million) and Swedbank (€320 Million). These money laundering cases involving high-profile EU financial institutions have highlighted that the EU’s approach to combatting money laundering, although sophisticated, nevertheless has a number of vulnerabilities.

Starting from SEB AB, after the investigation held by Sweden’s Financial Supervisory Authority covered the period from 2015 to 2019, it was revealed that the big Scandinavian financial institution was permitting money laundering worth at least €5 million. SEB Bank, carried out transactions with a high risk of money laundering, while failed to provide adequate AML measures for its subsidiaries. Following, on 19th of March, Swedbank AB, the oldest retail bank in Sweden, was levied with a record fine of €322 million for serious deficiencies in its anti-money-laundering work and for withholding information from authorities. According to the Report published by Clifford Chance, Swedbank pursued high-risk individuals and lacked the proper controls to combat money laundering. In a statement accompanying the Report’s release, Swedbank’ s Chairman stated that “Clifford Chance’s Report confirms the bank’s failure”.

Similarly, the failure to conduct adequate KYC on customers and properly prevent money laundering, resulted in a fine of €39 million from UK against the London branch of Germany’s Commerzbank. What is the most interesting in this case, is that the bank has been continuously informed by the UK FCA since 2012 about the weaknesses on its AML procedures and did not take sufficient measures to sort the problem out. Finally, Deutsche Bank having a global reputation in scandals, on October 2020, was fined with a €13.5 million for lag in reporting hundreds of suspicious transactions in a due time. In the same time, the German public prosecutor dropped the investigation against Deutsche Bank concerning the suspicious transactions that originated from Danske Bank, due to lack of sufficient suspicion,  despite the fact that the bank’s involvement to the world’s biggest money laundering scandal is still uncovered. 

The European Commission, considering the EU money laundering scandals, as well as the subsequent risk for the stability of the financial system, called for advice the European Banking Authority (EBA), which in response issued on 10th of September a Report on the future AML framework in the EU. In this report, the EBA sets out how the EU’s legal framework should be amended to tackle vulnerabilities linked to divergent national approaches and gaps in the EU’s anti‐money laundering defenses. Core proposal of the Report was the establishment of a single rulebook of common rules. In light of the fact that the ¼ of the EU countries have so far failed to apply the 5th AML Directive, an EU single rulebook may be the key for the consistent and comparable outcomes in the fight against money laundering. 

Read also: Money laundering in the time of Covid-19, by Christina Poursanidou, Lawyer  

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