Erik Thedéen: How we need to work to fight money laundering

• Date: 2019-11-07
• Speaker: Erik Thedéen
• Meeting: Swedish Bankers' Association's Bank Meeting 2019

Finansinspektionen (FI) has taken several initiatives over the past year to strengthen its anti-money laundering supervision. We enhanced the international supervision cooperation, and we are now conducting broad investigations into anti-money laundering measures in coordination and close cooperation with the supervisory authorities in the Baltic countries. We also established a permanent working group together with our Nordic and Baltic supervisory colleges to further improve the methods of and exchange of information in supervisory work to fight money laundering. Internally, we are also increasing our supervision resources and strengthening our capacity for anti-money laundering supervision in order to be able to carry out more and better investigations, thematic inspections, risk analyses – and communicate more to the financial firms on how they can improve their own anti-money laundering work. To further develop our efforts to fight money laundering, we now need to enhance the operational cooperation between authorities in Sweden, for example finding ways to more effectively share and benefit from each other's knowledge, competence and intelligence. We may also need to evaluate the need to amend the legislature regarding secrecy. FI will pursue these matters in close cooperation with the Swedish Police.

The discussion about how to improve anti-money laundering work can be discussed from many perspectives. For example, there are a number of ideas at the European level on how both legislation and the structure for anti-money laundering supervision could be modified in the future. We are also seeing proposals from private actors, both in Sweden and abroad, that aim to facilitate and improve the exchange of information between various parties; for example, the Swedish Bankers' Association has proposed legislative amendments to enable the exchange of information between authorities and banks as well as between banks themselves. It is positive that these issues are being pursued both nationally and internationally. Everyone involved needs to be creative and think outside the box to find new and improved solutions that make it difficult for criminals to misuse banks and other financial firms for money laundering. However, several of the proposals that have been presented, both regarding future anti-money laundering supervision and technical solutions for sharing information, could take a long time to implement. I would therefore like to emphasise that it is equally important that we develop improvements in parallel that can be quickly implemented. We need to make advancements in the fight against money laundering here and now, within the current system and regulatory framework.

The national coordinating function for anti-money laundering and countering terrorist financing measures, which is headed by the Swedish Police, provides a good platform for facilitating anti-money laundering cooperation between authorities. And this work has already generated results, in part in the form of the national risk assessment that the function publishes on a regular basis. As a next step, the cooperation within the coordinating function must become more operational so we can draw more benefits from the total competence, knowledge and intelligence within the participating authorities. This includes reviewing the possibilities for sharing confidential information between authorities. We consider the current possibilities to be too narrow. If we draw parallels to FI's work with financial stability, we can see that we have significantly greater possibilities for sharing sensitive information with other authorities that also are tasked with financial stability, primarily the Riksbank and the Swedish National Debt Office. We must move in that direction as well in terms of the fight against money laundering. For example, FI would like to be able to share information from our anti-money laundering investigations with other authorities in the coordinating function, even if there are no concrete suspicions that a crime was committed. FI's supervision could also become more efficient and accurate if we could receive more information and intelligence from other authorities, the Financial Intelligence Unit in particular. With more cooperation and a greater exchange of information, I also think we will be able to better understand which sectors, counterparties and types of transactions are associated with the greatest money laundering risks. The financial firms must ultimately be informed as well, in part through the coordinating function's regular national risk assessment.

Money laundering is a cross-border phenomenon, and the major Swedish banks are active in several countries. Strengthening and enhancing the cooperation with supervisory authorities in other countries to fight money laundering and terrorist financing is therefore a priority area for FI. We also have a close and coordinated cooperation with the Baltic supervisory authorities regarding ongoing investigations into the governance and control of anti-money laundering measures at SEB's and Swedbank's Baltic operations. The Estonian supervisory authority is conducting investigations into the compliance of the Estonian subsidiaries with local regulations parallel to and in coordination with FI's investigations into the Swedish parent companies' governance of their subsidiary banks. Both FI and the Estonian supervisory authority recently announced that they have opened sanction cases against Swedbank.

We see a need to continue to work closely in our anti-money laundering supervision even after the ongoing investigations have been concluded. We are therefore planning to expand the existing supervisory colleges for SEB and Swedbank, where the relevant authorities coordinate their supervision, to include sub-groups that will focus specifically on anti-money laundering supervision. This will enable us to continue our in-depth cooperation on operational supervision. But we could also invite more relevant supervisory authorities from, for example, the other Nordic countries. In the long-run, these types of cooperation will also be regulated through guidelines from the European Banking Authority (EBA).

In addition to the operational cooperation, there is also the new Nordic-Baltic anti-money laundering working group that was started in the spring. The group is already active and advocating more coordinated money laundering supervision in the region, the sharing of best practices in supervision methods, and better exchange of information. The cooperation will also be formalised through a Memorandum of Understanding, which we expect to be in place by the end of the year. It is our understanding that we have come farther in the Nordic-Baltic region than many other countries in Europe with regards to the actual organisation of cross-border anti-money laundering supervision cooperation.

FI's assignment for anti-money laundering supervision does not only include banks but also other types of financial firms. Together, they total more than 2,000 supervised entities. We need to have sufficient resources to carry out our assignment in an adequate manner, but we also need to continuously develop efficient working methods to identify, classify, and monitor money laundering risks at the sector and firm levels. Our goal is to have tripled the capacity of our anti-money laundering supervision by the end of 2020, compared to 2018. When we strengthen our resources, we will not only recruit more anti-money laundering experts, but we will also re-prioritise and reallocate existing supervision resources within FI's organisation to enable more people to work with anti-money laundering supervision. For example, supervisors, analysts and legal counsellors from more areas within FI are involved in the ongoing investigations into the governance and control of anti-money laundering measures in SEB's and Swedbank's Baltic operations. Through this approach we can add more supervision experience and broaden the perspective in the anti-money laundering investigations, at the same time as we disseminate knowledge about money laundering risks and anti-money laundering work within FI.

I believe that both authorities and firms should think outside the box about how to work to fight money laundering. We must be open to new and perhaps unconventional structures, for example about how we organise our anti-money laundering supervision, share information and use new technology. But the big solutions will take time. My most important message today is that we also can and must do something here and now. We need to prioritise an enhanced cooperation between today's authorities, both within our borders and beyond. We also need to find answers for the issue of how to better share existing information, between authorities and between financial firms – but also between authorities and financial firms.