All of the major Nordic banks have meaningful exposures to the Baltic region, which has been beset by allegations of money laundering and other financial crime in recent months.
Danske Bank A/S is in the middle of a fresh investigation by the Estonian authorities over allegations that it did not do enough to prevent Russian money laundering via its Estonian business in 2013. The news came as ABLV Bank AS, a local bank in neighboring Latvia, was liquidated following outflows of deposits triggered by money laundering accusations tabled by the U.S. Treasury Department's Financial Crimes Enforcement Network.
Swedbank AB (publ) has also been hauled up recently for lax anti-money laundering policies in its Baltic operations. It was warned by the Lithuanian central bank in February that it needed to improve "deficiencies" in its internal control system.
Branches of the major Nordic banks are popular with both retail and commercial clients in the Baltic countries. Swedbank is particularly active, and its Estonian arm Swedbank AS is the largest lender in the Baltic region, with total assets of €10.13 billion. The bank also has subsidiaries in Lithuania and Latvia.

In total, Baltic banking made up 17.50% of Swedbank's operating income during the 2017 full year, up from 16.68% the previous year. The Baltic countries are also an important line of business for Skandinaviska Enskilda Banken AB., accounting for 8.58% of operating income in 2017, compared with 8.02% the previous year.
Nordea Bank AB (publ) and DNB ASA combined their Baltic operations in 2016, creating an entity called Luminor.
With the Baltics at the crossroads between the former Soviet Union and the EU, banks in those countries are popular with Russian clients doing business in Europe. However, some of the money flowing through the region's banks is illicit, and has been linked to money laundering and terrorism, previous investigations have found.
A culture of lax enforcement of anti-money laundering controls and political apathy have helped financial crime to flourish in the Baltic region, according to Tim Stanley, senior managing director for Russia and the Commonwealth of Independent States at Control Risks, a consultancy firm specializing in political risks to businesses.
"Latvia in particular among the Baltic states has long positioned itself as a financial conduit between clients across the former Soviet Union and financial institutions in Europe. All banks operating in Latvia are subject to the same stringent EU regulations as any other bank operating in an EU jurisdiction. However, there appears to be a systemic weakness that has allowed this [the alleged breaches at Danske Bank] and a number of other Baltic banking scandals to occur," Stanley said. "Weak regulatory oversight at all levels has allowed a culture of weak compliance to prevail, met with political indifference."
Banks operating in the region can take steps to protect themselves by having a "zero tolerance, risk-based approach to compliance," he added.
Giedre Bielskyte. communications manager at Luminor's Lithuanian branch, said in an email that the bank "continues to communicate frankly" with clients regarding Know Your Client and anti-money laundering regulations.
"Current events do not affect the work of Luminor, and we continue to serve our target clients [individuals and local companies the Baltic States] as we have so far by respecting the compliance and low risk policies ... that we implement in our daily work and providing financial services in accordance with the national and EU law regulations," she said.
Danske Bank and the Danish Financial Supervisory Authority declined to comment while SEB and Swedbank did not respond to requests for comment.
Want to dig deeper into a company's performance on a geographic level? Access our "Segment Analysis" page under the "Financials" section of a company's profile on the website. Here is an example for Swedbank AB. Want to see which banks have retail presence in the Baltic region? Use the search bar on top to go to a specific country's profile on the website. On the left, expand "Banking Industry" and click on "Branch Networks". Here is an example for Latvia. Click here to set-up real-time alerts for data-driven articles on any region of interest. |

