Browder Files Criminal Complaint Against Swedbank for Laundering

(Bloomberg) -- Bill Browder, the investor who's made a career of chasing money launderers, filed a criminal complaint against Sweden's oldest bank.

The Hermitage Capital Management co-founder alleges that Swedbank AB handled $176 million connected to the death of Sergei Magnitsky. Sweden's Economic Crime Authority has confirmed receipt of the complaint, which is dated March 4. The allegations follow separate claims that tie Swedbank to almost $6 billion in suspicious transactions.

Browder alleges that for years, criminals from the former Soviet Union turned to the Baltic units of Nordic banks to launder their money, enabling them to pay for Western luxuries such as private schools for their kids and expensive homes. Browder has previously filed complaints against Danske Bank A/S, which is now being investigated in the U.S. for its role at the center of a $230 billion Baltic laundering scandal.

Browder is asking prosecutors to include Nordea Bank Abp, the Nordic region's biggest lender, in their investigation of Swedbank. He's also calling for the creation of an international team to ensure an “effective investigation,” as the case balloons to include banks across the rest of Europe.

Regulators in Sweden and Estonia started investigating Swedbank last month following media reports linking it to the Danske case. Browder is chasing all banks he says played a part in enabling a $230 million tax-fraud scheme. Magnitsky, Browder's lawyer, died in a Russian prison in 2009 after trying to bring the perpetrators in that case to justice.

According to the complaint, which was also filed to the Swedish government and police, the signs of money laundering were hard to miss. Browder points to the location of corporate account holders in countries such as the British Virgin Islands and the Marshall Islands. Meanwhile, others registered in the U.K. “appear to have filed zero or no financial returns” even as they did transactions of “substantial dollar amounts” via their Swedbank accounts, he said.

Swedbank employees “failed to block and report suspicious transactions with multiple suspicious counterparties in large amounts, thereby facilitating the illegal activity,” the complaint alleges.

“Red flags were obvious” in a number of cases, raising suspicions that employees may have actively assisted clients in laundering money, according to the document.

Swedbank, which dominates the Baltic region's financial markets, has been forced to backtrack on its earlier insistence that it wasn't involved in the Danske case. Danske took over the Tallinn-based operations at the center of the scandal as part of a bigger deal with Sampo Oyj of Finland in 2007. Before Sampo, the unit was majority owned by the Estonian central bank.

Swedbank's U-turn followed a Feb. 20 report by Sweden's main broadcaster, SVT, alleging the bank had misled the public about its Baltic dealings. SVT says Swedbank provided services to Russian oligarchs and deposed Ukraine President Viktor Yanukovych, among others.

Swedbank has since acknowledged it handled suspicious transactions, which have been reported to the police. The bank has declined to comment on individual clients or transactions.

The development has put pressure on Chief Executive Officer Birgitte Bonnesen, who ran Swedbank's Baltic business from 2011 until 2014. For now, the board has given Bonnesen its backing, but some investors have criticized management's handling of the revelations.

Meanwhile, Sweden's state prosecutor has started a separate probe to find out whether Swedbank broke insider information rules, after it gave its biggest shareholders advance warning that SVT was planning to publish a report. The bank has denied wrongdoing.

Since the allegations first surfaced on Feb. 20, Swedbank has lost almost a fifth of its market value, equivalent to about $5 billion. By comparison, Danske's scandal has cost it almost 50 percent in lost market value over the past year, equivalent to roughly $17 billion.

The allegations:

77 Swedbank Baltic accounts received $18 million from 13 Danske Estonian accounts
The biggest share of the $176 million in transactions was tied to Ukio Bank, a Lithuanian bank that was declared bankrupt in 2013
590 Swedbank accounts in the Baltics and Sweden received $158 million from 102 Ukio accounts
50 Swedbank accounts in Sweden received around $2.4 million from 31 Ukio accounts opened by shell companies located in Belize and the British Virgin Islands.
The money flowed in both directions: 91 Swedbank accounts held by individuals and businesses sent $92 million to 46 Ukio accounts

--With assistance from Ott Ummelas.

To contact the reporters on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net;Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net