(Bloomberg) -- Swedbank AB faces an increased risk of fines amid allegations its Baltic operations may have handled more than $100 billion in potentially suspicious funds, the lender’s regulator said. Sweden’s financial watchdog gave its strongest indication yet that there’s evidence of serious wrongdoing at Sweden’s oldest bank and biggest mortgage lender. Its findings to date show there could be grounds for sanctions, which under Swedish law can mean fines of up to 10% of a bank’s total annual income. In Estonia, state prosecutors said on Tuesday they had launched a separate criminal investigation into the country’s largest lender in July. The Swedbank case exploded earlier this year after the bank was forced to cease months of misstatements and acknowledge its involvement in the $220 billion Danske Bank A/S laundering scandal. The development cost Chief Executive Officer Birgitte Bonnesen her job in March, and Swedbank said last week it’s now being investigated by multiple authorities in the U.S. On Monday, fresh allegations were leveled against the bank suggesting it may have breached European Union sanctions. For Swedbank, even bad news might be better than the uncertainty that has shrouded the case all year. “The investigation is like a cloud hanging over Swedbank, so the sooner the FSA reaches a decision, the better,” said Joakim Bornold, a savings advisor at Soderberg & Partners in Stockholm. Shares in Swedbank fell more than 4% in Stockholm, pushing the bank to the bottom of the Bloomberg index of European financial stocks on Tuesday morning. Swedbank’s market value has slumped more than 30% this year. Estonian prosecutors said they were investigating Swedbank for potential money laundering in 2011-2017 and presenting false information to financial supervisors. They had previously said they were collecting information on Swedbank as part of a criminal investigation into Danske Bank A/S, which was ordered to leave the Baltic country earlier this year. Swedbank was aware it could be investigated as part of the criminal proceedings into Danske, but hadn’t been informed about a separate criminal probe, Kristiina Herodes, the spokeswoman for the bank’s Estonian unit, said in emailed comment. “The bank continues to service clients on a daily basis and remains well capitalized.” Though Tuesday’s development underscores the likelihood of Swedish fines, “the greater risk for Swedbank is of course still the U.S. authorities that are investigating the money-laundering scandal,” said Joacim Olsson, the CEO of the Swedish Shareholders’ Association. Those investigations may drag on for years, the bank said last week. In statements on Tuesday, the Financial Supervisory Authorities of Sweden and Estonia both said their findings to date may result in sanctions. The FSA in Tallinn said it decided to escalate its probe after finding “evidence of a misdemeanor.” The Swedish FSA, whose director recused himself earlier this year due to his ties to a former Swedbank board member, said it’s now found “sufficient grounds for assessing whether the deficiencies and weaknesses observed during the investigation should lead to a sanction or if the investigation should be closed in another manner.” What Bloomberg Intelligence Says: “A new Swedish FSA sanction case, coupled with Swedbank’s tight capital buffer -- $800 million over the regulatory minimum -- confirm its vulnerability to money-laundering fines, we believe, even though Danske Bank likely faces a larger penalty. The lender’s dividend, cut to a 50% payout, may need to change again if fines approach $1 billion.”----Philip Richards, Senior Bank Analyst at Bloomberg Intelligence The regulator said it will now continue to analyze the circumstances in the matter as well as legal issues until the next step in the sanction process. The FSA plans to announce its findings at the beginning of next year. A probe into the same matter at SEB AB is still ongoing, it said. How Sweden Calculates Bank Fines: The Swedish FSA can issue a fine if it finds that Swedbank has breached the law regarding money-laundering prevention. The size of the fine can amount to 10% of the bank’s total income in the previous year, or to two times the profit that the bank has made by breaching the rules, or to an amount equivalent to 5 million euros ($5.54 million). Swedbank reported total income of 44.2 billion kronor ($4.55 billion) last year, meaning that the fine based on 2018 numbers could be as high as 4.42 billion kronor. Story continues (Adds Estonian prosecutors launching separate criminal probe.) --With assistance from Christian Wienberg, Ott Ummelas, Frances Schwartzkopff and Veronica Ek. To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net;Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Jonas Bergman For more articles like this, please visit us at bloomberg.com ©2019 Bloomberg L.P.
There may be grounds for sanctions against Swedbank , Sweden ’s Financial regulatory Authority has emerged . It follows claims the bank could have handled more than $ 500 of potentially suspicious funds as a result of links to Danske Bank ’s money laundering scandal . A fine could be up to 10 % of the bank ’s total annual income . Further investigations have been launched by regulatory authorities . Estonian regulators have also investigated “ allegations of a misdemeanour ” . Swedbank shares fell 4 % to reach the bottom of Bloomberg ’s European financial stocks rankings and its market value has already fallen 30 % in 2019 .