Swedbank's Lingering Legal Risks Amid Closure of SEC Probe

Swedbank AB, Sweden’s second-largest bank, has navigated a turbulent regulatory landscape in recent years. While the U.S. Securities and Exchange Commission (SEC) recently closed its five-year investigation into the bank without imposing penalties, residual risks persist from ongoing probes by the U.S. Department of Justice (DOJ) and the New York Department of Financial Services (NYDFS). These unresolved issues, coupled with a history of anti-money laundering (AML) failures and sanctions violations, raise critical questions about the bank’s long-term valuation and investor confidence.

SEC Closure: A Mixed Victory

The SEC’s decision to conclude its probe without enforcement action, announced on September 6, 2025, marks a significant milestone for Swedbank [1]. The investigation, which began in 2019, focused on historical governance and AML shortcomings linked to the Danske Bank scandal, where €4 billion in suspicious transactions flowed through Swedbank’s Baltic branches [2]. While the closure alleviates immediate pressure from one major regulator, it does not erase the bank’s legacy of compliance failures.

Swedbank has implemented 152 governance and AML reforms since 2019, including geofencing controls and enhanced due diligence protocols [1]. However, these measures have not fully insulated the bank from scrutiny. As Bloomberg Intelligence analyst Philip Richards notes, the resolution of the SEC probe “does not eliminate the risk of future penalties from U.S. authorities, which could range from $386 million to over $1 billion” [1].

Ongoing U.S. Investigations: A Pending Sword of Damocles

Despite the SEC’s exit, Swedbank remains under investigation by the DOJ and NYDFS for alleged AML and sanctions violations. In 2023, Swedbank Latvia settled with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) for $3.43 million, stemming from 386 apparent violations of Crimea-related sanctions between 2015 and 2016 [3]. These violations, which involved transactions initiated via Swedbank Latvia’s e-banking platform and processed through U.S. correspondent banks, were deemed “non-egregious” but highlighted systemic compliance gaps [3].

The DOJ and NYDFS investigations are expected to scrutinize similar issues, particularly Swedbank’s correspondent banking practices and its handling of high-risk clients in the Baltic region. Analysts warn that U.S. regulators are increasingly prioritizing AML enforcement, with penalties for non-compliance rising sharply in recent years [4]. If the DOJ follows the precedent set by Danske Bank’s $2.2 billion settlement in 2022, Swedbank could face fines in the hundreds of millions or even billions of dollars [1].

Historical Penalties: A Pattern of Regulatory Missteps

Swedbank’s regulatory troubles are not confined to the U.S. In 2020, Swedish and Estonian authorities fined the bank 4 billion SEK ($386 million) for AML deficiencies in its Baltic operations [2]. This was followed by a 2025 administrative fine of 12.5 million SEK from Finansinspektionen (FI) for security lapses that exposed vulnerabilities in Sweden’s national infrastructure [5]. These penalties underscore a pattern of systemic weaknesses, particularly in high-risk jurisdictions where the bank historically pursued aggressive growth strategies [2].

FI’s 2025 fine, while smaller in absolute terms, signals heightened scrutiny of Swedbank’s operational security. The regulator noted that the bank’s deficiencies were due to negligence rather than intent, but the prolonged nature of the violations—spanning 18 months—was deemed aggravating [5]. This suggests that even minor lapses could escalate into costly regulatory actions if not addressed proactively.

Valuation Implications and Investor Sentiment

The cumulative impact of these risks on Swedbank’s valuation is multifaceted. First, potential fines from the DOJ and NYDFS could erode earnings and necessitate additional capital reserves. Second, the cost of compliance reforms—estimated at hundreds of millions of SEK since 2019—has already strained the bank’s profitability [1]. Third, reputational damage from repeated regulatory failures may deter institutional investors, particularly in the U.S., where Swedbank’s market presence is limited but growing [6].

Investor sentiment remains cautiously optimistic. The SEC’s closure of its probe has stabilized short-term confidence, with Swedbank’s stock rising 8% in the week following the announcement [1]. However, long-term optimism is tempered by the unresolved U.S. investigations. As one equity analyst observes, “Swedbank’s valuation premium to regional peers hinges on its ability to demonstrate sustained compliance improvements. A single major penalty could reverse this trend.”

Conclusion: A Delicate Balance

Swedbank’s regulatory journey reflects a broader industry trend: the escalating cost of compliance in an era of global enforcement. While the SEC’s closure of its probe is a positive step, the bank’s ongoing exposure to U.S. investigations and its history of AML failures suggest that residual risks remain significant. For investors, the key question is whether Swedbank can transform its compliance culture and mitigate the likelihood of future penalties. Until then, the bank’s valuation will remain vulnerable to regulatory shocks—a reality that underscores the importance of continuous due diligence in an increasingly punitive financial landscape.

Source:
[1] Bloomberg, “Swedbank Says SEC Has Closed Six-Year Probe Without Enforcement” [https://www.bloomberg.com/news/articles/2025-09-07/swedbank-says-sec-has-closed-six-year-probe-without-enforcement]
[2] Money Laundering News, “AML Problems Plague Swedbank” [https://www.moneylaunderingnews.com/2020/03/aml-problems-plague-swedbank/]
[3] Money Laundering News, “Swedbank Latvia Settles with OFAC for Apparent Crimea Sanctions Violations” [https://www.moneylaunderingnews.com/2023/07/swedbank-latvia-settles-with-ofac-for-apparent-crimea-sanctions-violations/]
[4] Sanction Scanner, “Top 14 Biggest AML Fines of All Time (Updated for 2025)” [https://www.sanctionscanner.com/blog/top-14-biggest-aml-fines-of-all-time-updated-for-2025-1034]
[5] Finansinspektionen, “Swedbank Receives an Administrative Fine” [https://www.fi.se/en/published/sanctions/financial-firms/2025/swedbank-receives-an-administrative-fine/]
[6] Reuters, “Cash App Owner Block Pays $40 Million Fine to New York Over Compliance Failures” [https://www.reuters.com/business/finance/payments-company-block-pay-40-million-fine-new-york-over-compliance-failures-2025-04-10/]