Anti-money laundering is not a national issue
Casper von Koskull, chief executive of Nordea, does not downplay the money-laundering scandal engulfing the Nordic region. Nor does he dismiss the idea that systems at Nordea – Scandinavia’s biggest bank – might previously have lagged international best practice.
Starting with the Estonian branch of Danske Bank, which remains the most affected, reports of large flows of suspicious money have spread to other Nordic lenders, including Swedbank and Nordea, over the last year.
“I take it extremely seriously and do not underestimate it,” says von Koskull. “We were behind the curve as a society.”
Banks and regulators need a sea-change in how they tackle it, he says.
“Money laundering is cross-border, and we only see part of the chain. The only way forward is much closer cooperation between banks; between banks and authorities; and between authorities and banks. We need a supra-national authority for this, certainly at a European level.”
Part of the problem, he acknowledges, is that existing European bodies, such as the ECB, are wary of taking on such a large responsibility. Nevertheless, he says a new consensus is emerging in Europe about the need for such an authority.
“Anti-money laundering is not a national issue; there’s no way you can do it with a national lens. The perpetrator and the victims are not Nordics or even Baltics: it’s our system that’s being abused. It’s a global issue and it’s a societal issue.”
Over the last three years Nordea, like other Nordic banks, has taken steps to improve its anti-money laundering (AML) systems, so the criticism it has faced could relate to issues it has already addressed, to some extent. It has invested more than €500 million on improving its AML systems, deploying 5% of its workforce on the problem and retraining others.
Von Koskull is critical about some of the media’s telling of the events.
“Banks are not liked,” he says. “It’s the media playing prosecutor, judge and jury.”
In his opinion, the public could end up missing the real issue and forgetting about the real perpetrators and victims of crime.
Money laundering is not the only issue impacting reputations, as banks in Scandinavia have also cut branches with unusual ruthlessness. Last year, Nordea moved its headquarters from Stockholm to Helsinki to join the EU’s banking union. Von Koskull says there has been only short-term controversy and no long-term damage to its franchises from the move, despite questions about the bank’s commitment to Sweden.
Nordea’s chief executive says another danger of knee-jerk reactions to money laundering could be that legitimate counterparties end up blocked out of the system, opening the banks to new criticism.
“We may be trying to do the right thing, but by being more risk averse and saving money, we could make a country un-bankable.”
Yet von Koskull’s mandate, on becoming chief executive in 2015, was partly to invest in AML compliance systems, not least after the Swedish regulator fined the bank SKr50 million ($6 million) that year for AML weaknesses.
“We were naive and complacent; we underestimated the complexity involved and the systems needed to deal with it,” says von Koskull.
The September 11, 2001 attacks in the US saw AML systems tightened globally, especially in the US, von Koskull recalls. In Scandinavia, tighter rules only came relatively late in the 2000s, while the aftermath of the 2008 global financial crisis subsequently distracted the sector from bringing its standards up to scratch.
Scandinavian banks may have been more affected than others lately partly because of their proximity to Russia, which has seen a relatively steep decline in the last decade in its attractiveness as a source and destination for investment, particularly in banking.
“All the money that flowed into the rest of the world from the former Soviet Union was welcomed not too long ago,” he remembers.
Western attitudes to doing business with Russia, however, have tightened, especially since the 2014 invasion of Crimea.
“We are fundamentally different compared to four years ago,” says von Koskull. “But criminal activity will always be two steps ahead. We are in a different place today to what we were, but we will need to do more – and even that’s not enough, as we need different infrastructure for cooperation between banks, and between bank authorities.”