On Thursday, Swedbank’s Board of Directors fired CEO, Birgitte Bonnesen, in the wake of yet another top financial crime investigation. This firing comes behind other recent news of banks – including Danske Bank, Commonwealth Bank and ANZ – losing top executives and CEOs as a result of money laundering scandals.
While the firing of a top executive sends a strong message, this response from Swedbank’s Board was clearly a reactive measure to complaints from Swedbank’s largest shareholders, the Swedish pension funds, and the raid of Swedbank by Swedish law enforcement. Where was the Board before this became top news? Where was the Board before the share price fell over 30% since the end of 2018?
The primary responsibility of a Board of Directors is to oversee the management and governance of the company and the Board has fiduciary obligations to the corporation and its shareholders. Good corporate governance includes overseeing how the company is managing enterprise risk – leaving open the obvious question of why there weren’t more proactive risk management measures being taken by Swedbank’s Board.
In late 2017, AlixPartners conducted a survey of 361 financial institutions which gives some insight into the adequacy – or, frankly, the inadequacy – of Board oversight. The survey found that 20% of the financial institutions surveyed do not provide regular briefings or training on money laundering and sanctions to their Boards. This is alongside 32% of those institutions saying that their compliance budgets were inadequate to address their compliance responsibilities.
It is important to remember that while money laundering is often the top financial crime headline, it is not the only financial crime and the associated risks extend beyond financial institutions. Every cross-border investment firm, multinational corporation and early stage fintech company needs to pay attention to risks of sanctions violations, corruption, money laundering and fraud. Even companies like Uber and AirBnB have found themselves in the news recently about money laundering concerns.
Compliance scandals have long term reputational consequences to which Boards must be acutely attuned. The banking sector also saw Thursday the departure of Wells Fargo’s CEO, Tim Sloan, as the bank struggled to regain trust resulting from its customer abuse scandals dating back to 2016.
A culture of compliance starts at the top. What should Boards of Directors be doing to more proactively manage compliance risks? Stay tuned over the coming weeks as we dive deeper into this topic on this blog.