The War on Cash is exposed by yet more banking sector money laundering

by Shaun Richards

Some days events almost write an update for me and so without further ado let me hand you over to a letter from the President of the ECB Mario Draghi to the Spanish MEP Ms Paloma López Bermejo.

The Governing Council of the ECB has decided to stop issuing the €500 banknote and to exclude it from the
Europa banknote series , amid concerns that this denomination could facilitate illicit activities. As of 27
January 2019, 17 of the 19 national central banks in the euro area no longer issue €500 banknotes.

As you will see in a moment if “could facilitate illicit activities” was applied consistently then Mario would be closing down bank after bank and maybe all of them. Yet we find that when we come to “the precious” that the goalposts are on wheels as they are so mobile. Oh and you may not be surprised to see which two central banks are dragging their feet.

To ensure a smooth transition and for logistical reasons, the Deutsche Bundesbank and the Oesterreichische
Nationalbank requested the right to continue issuing the notes until 26 April 2019.

I am not quite sure where Mario is going with this bit as actual withdrawal of the notes would collapse confidence in his currency.

In order to maintain public trust in euro banknotes, existing €500 banknotes will remain legal tender and can
continue to be used as a means of payment and store of value. They will also retain their value; because it
will remain possible to exchange them at the national central banks of the Eurosystem for an unlimited period
of time.

Swedbank and money laundering

This has been a fast-moving story so let us dip into Reuters from only yesterday,

Money laundering allegations against Swedbank have sparked fears that the largest lender in the Baltic region will become embroiled in a scandal engulfing rival Danske Bank, and face the threat of lawsuits, fines and other sanctions.

Swedbank Chief Executive Birgitte Bonessen said she was doing everything she could to handle the situation, adding that nobody at the bank had been charged with committing a crime.

That has moved on already as we move to @LiveSquawk.

Trading In Shares In Swedbank Halted……….Swedbank Shares Trade Halt To Remain Until Notice From AGM…….Swedbank Says Board Has Dismissed CEO Bonnesen, Started Search For Permanent Replacement

As you can see this escalated quickly and is still doing so as I type this. As to Ms. Bonnesen we see that not only are her fingers all over this but it looks like she was promoted due to her “success” in what has turned out to be money laundering on an industrial scale. Back to Reuters.

“Swedbank believes that it has been truthful and accurate in its communications with all government authorities,” said Bonnesen who oversaw the bank’s anti-money laundering policy between 2009 and 2011 before heading its Baltic operations.

As to the details of what took place there is this.

Regulators in Sweden, Estonia, Latvia and Lithuania began a joint investigation into Swedbank after SVT in February reported allegations that at least 40 billion Swedish crowns ($4.3 billion) in suspicious transactions took place between Swedbank and Danske Bank’s Baltic accounts.

If we look at the share price we can put a time on this as the 210.8 Krona on the 19th of February was replaced by 165.1 on the 21st. It was 148.8 this morning before trading was halted.

Moving to the specific problems we see this. Johannes Borgen pointed out yesterday evening that a familiar theme of “higher and higher baby” was at play.

“Today’s initiated activity [.. refers to unlawful disclosure of inside information and aggravated swindling.” On top of the reported 135bn cash flows for high risk non resident clients in the Baltics.

Also one of the flags for this sort of thing are PEPs or Politically Exposed Persons where banks have or rather should have very strict rules for obvious reasons and yet there was this. Johannes again in the next two quotes.

SVT reported that ex-Ukraine boss Yanukovych used a Swed Baltic account to transfer money out of Ukraine in 2011 ($4m…) How on earth can that not raise a GIGANTIC red flag ??? Seriously ???? When I see all the admin nightmare that comes with being a PEP…

For those unaware all such clients are only approved after due dilligence although we are supposed to believe that someone failed to spot the new client was the President of the Ukraine. Also if we switch to the share price plunge I looked at above apparently then some being ahead of the game is just find.

But really the absolute TOP story is this: reportedly (Dagens Nyheter) the bank told its 15 largest shareholders about the SVT broadcast on AML… two days ahead !! And now the bank says it was not insider information 🤣🤣

Those having something of a sense of deja vu about all this might be thinking of February 19th last year.

The Financial and Capital Markets Commission (FCMC) has imposed a moratorium on ABLV Bank, following a request by the European Central Bank (ECB). This means that temporarily, and until further notice, a prohibition of all payments by ABLV Bank on its financial liabilities has been imposed, and is now in effect.

Another money laundering problem and yet again one where the US authorities opened up the can of worms. Also the problems went as high as the central bank itself.

Latvian authorities prepared to explain the detention of ECB Governing Council member Ilmars Rimsevics by the anti-graft bureau in a weekend of activity culminating in the early-Monday imposition of a payment moratorium on the nation’s third-largest bank.

Comment

There are a lot of strands which collide here but the “war on cash” theme is rammed home by the fact that the ECB is on its case as it “could” cause illicit activity whereas banks that have done so get overlooked for quite some time. Care is needed as such activity crosses borders by definition and many of the activities highlighted above took place before the ECB was fully in charge as the Baltic countries joined the Euro more recently. But there is supposed to be an accession programme which should be including due diligence on banking activities. After all in the case of Latvia this ended up exceeding its annual economic output or GDP! Also it is the US authorities rather than the European ones who start the policing ball rolling.

Each saga involves misrepresentation and obfuscation from the directors of the bank or banks involved followed by ever larger numbers.

Moving onto happier news for the ECB this morning’s money supply release provided a bit of relief.

Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, increased to 6.6% in February from 6.2% in January.

Which led straight to this as there was a minor change in M2 but essentially M1 flowed into this.

Annual growth rate of broad monetary aggregate M3 increased to 4.3% in February 2019 from 3.8% in January.

So things did not get worse and in effect in narrow money terms we went back to December. Perhaps the better numbers from France I looked at on Tuesday helped. Thus we can expect Euro area economic growth to be slow but for there to be some overall.

The Investing Channel

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