Swedish, Estonian regulators advance Swedbank probe

Swedish and Estonian financial regulators have opened sanction cases into Swedbank (SWEDa.ST) over anti-money laundering controls at its Baltic operations, they said on Tuesday, a formal step in an ongoing investigation that could lead to a financial penalty.

Sweden’s financial supervisory authority (FI) said it had identified weaknesses in Swedbank’s anti-money laundering procedures, and was now examining if it should face a formal sanction.

The lender has previously admitted to failings in its money-laundering controls in the Baltics, and it was widely expected that the FSA would go ahead with a formal case after opening an investigation earlier this year. A decision is expected early next year.

“We knew this was going to come,” Andreas Hakansson, banking analyst at Danske bank said.

“A big fine is clearly priced into the valuation of Swedbank, but how big it’s going to be from the Swedish FSA or how big it will be from the U.S, we don’t know.” The maximum fine that the FSA can impose is 10% of annual group revenue. Investors are also watching two ongoing investigations from U.S. authorities.

Swedbank has lost around 40% of its market value since its Estonian business was caught up in money laundering allegations that have engulfed Danish peer Danske Bank (DANSKE.CO).

Swedbank’s shares were down 3.62% at 0935 GMT, under-performing the European banking index .SX7P, which was down 0.9%.

Estonia’s watchdog issued a similar statement about Swedbank’s Estonian subsidiary.

Sweden’s oldest retail bank dismissed its CEO over the handling of the scandal and accepted the resignation of its chairman earlier this year.

Swedbank is alleged to have processed suspect gross transactions of up to 20 billion euros ($22 billion) a year from mostly Russian non-residents through Estonia from 2010 to 2016.