New York State Department of Financial Services (DFS) Acting Superintendent Kaitlin Asrow announced today that Skandinaviska Enskilda Banken AB and its New York Branch (together, SEB or the Bank) have agreed to pay a $33 million penalty as part of a Consent Order to resolve the Department’s investigation into SEB’s compliance with New York Banking Law and anti-money laundering program failures.
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“Financial institutions must adhere to New York’s rigorous laws and regulations to safeguard the integrity of the financial system,” said Acting Superintendent Kaitlin Asrow. “The Department will hold entities accountable that fail to meet those standards.”
The 2016 Panama Papers leak of millions of Mossack Fonseca law firm records revealed the failure of financial institutions to meet legal and compliance obligations, including those relating to money laundering and offshore activity. The Department subsequently launched reviews of its licensees’ connections to the law firm, including SEB.
The Department’s investigation revealed critical gaps in SEB’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) program, including inadequate customer due diligence and failure to implement strategies to mitigate heightened money laundering risk associated with high-risk clients, notably exposing the New York market to this risk. The Department’s investigation also found that SEB failed to adequately conduct due diligence on high-risk correspondent banking partners, including foreign institutions, had deficient client files, miscalculated AML risk, and failed to update procedures governing correspondent bank relationships.
Additionally, the Department’s investigation found that SEB’s transaction monitoring program in its Baltic subsidiaries in Estonia, Latvia, and Lithuania was deficient in its ability to detect and block suspicious activity. The Department found the Bank’s transaction monitoring systems were backlogged, allowing transactions to evade timely review for money laundering and sanctions risks, and further exposing the Bank to the risk of processing illicit transactions.