In practice, money laundering and terrorist financing laws have allowed banks in Sweden to close accounts at will, often for obvious political reasons.
The government now wants to further strengthen the banks’ powers and is now setting up a working group that will, according to its terms of reference, “counter and make it more difficult for criminals to exploit the financial systems”.
– It’s about increasing the overall systemic power to fight economic crime”, said Minister of Justice Gunnar Strömmer (M) at yesterday’s press conference.
Gunnar Strömmer argues that it is “essential” to further strengthen the banks’ powers, arguing that financial crime has “caught up with and overtaken” drug trafficking as a major source of income for criminal groups.
The new task force will consist of representatives from both the Justice and Finance Ministries. The working group’s priority areas are said to be combating fraud, making money laundering/terrorist financing and other financial crimes more difficult, and the somewhat vague concept of “countering risks in the payment system”.
– We believe that banks can use some of their profitability to make their operations more resilient and robust against money laundering, crime and terrorist financing”, says Minister of Financial Markets Niklas Wykman (M), who also attended Tuesday’s press conference.
Banks, which have made huge profits in recent years in an otherwise strained national economy, are also being urged to tighten their procedures and control systems even further, despite warnings from individuals, small businesses and aid organizations who have suffered unwarranted closures and cancelled bank accounts.
“Increased communication between police and banks”
The working group will also work to “increase the exchange of information between the police and banks to combat money laundering. On October 1, a revised law will come into force that strengthens the police’s ability to use covert coercive measures.
According to the Minister of Justice, a large number of fraud crimes, which individually do not have a sufficiently high penalty value for the use of coercive measures, will soon be able to be “added up” so that the crimes as a whole reach the level of seriousness at which citizens can be spied on.
–In addition, covert coercive measures can now be used for more types of crime, such as serious fraud, extortion, perjury, serious money laundering offenses and money laundering”, Gunnar Strömmer comments on the bill.
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The Swedish Financial Supervisory Authority (Finansinspektionen) found in a survey that almost 160,000 Swedes had their bank accounts closed between 2020 and 2022.
In 2020, banks in Sweden closed 45,000 accounts on their own initiative, followed by 54,000 the following year and as many as 60,000 bank accounts in 2022 – a 33% increase in just two years.
No statistics are available for 2023 and 2024 – so it is not yet clear whether bank account closures in Sweden have continued to increase since then.
The purpose of Finansinspektionen’s survey is described as seeing how the banks handle their statutory obligation to offer payment accounts to consumers, and it is a bleak picture that is presented:
“The number of consumers having their payment accounts closed has increased by 30% in recent years.At the same time, banks continue to refuse consumers to open accounts at the same rate as before.Banks’ most common reason for refusing and closing accounts is lack of customer awareness”, it notes.
Alternative solutions
FI notes that the negative consequences for an individual who is refused an account or thrown out of the bank are very high, and that more needs to be done to improve their handling.
Although banks are certainly obliged to counteract suspected money laundering and terrorist financing, FI believes that there are often better alternatives than completely excluding people from the bank.
In doubtful cases, it suggests, for example, that monitoring of the customer’s transactions should be intensified or that appropriate limits should be introduced.
“FI believes that banks need to work purposefully to lower the thresholds for obtaining an account that can at least be used for certain everyday needs”, it writes.
“Serious consequences”
The report also looked at how banks handle offers of payment accounts to businesses. Although there is no legal obligation to offer companies bank accounts in the same way as private individuals, FI emphasizes that they should not be denied accounts with the banks lightly either.
“At the same time, companies’ access to financial services is also of great practical importance.Being denied a payment account often has consequences for the individual company that can be very serious”, it states.
When banks close their customers’ accounts, they usually claim that they have not been able to achieve “adequate customer due diligence” and that customers’ answers to various questions and wording are deemed “inadequate”.
However, evicted consumers have a different view and say that it is very difficult to have a constructive dialog with the bank, or to have any dialog at all.
Difficult for those affected
FI also notes that “consumers who, for various reasons, have unusual transaction patterns or make transactions that are deemed to involve a higher risk appear to have their payment accounts terminated to a greater extent than before”. This could include, for example, repeatedly withdrawing or depositing cash, or trading cryptocurrencies.
It also shows that only a fifth of Swedes who request a review of the bank’s decision are ultimately successful – and that it is very difficult to even get a decision from the bank that can be reviewed.
“Consumers are often asked to complete their applications, which means that an application is not considered complete.This means that the consumer does not receive a rejection or information on where to lodge a complaint.In practice, this makes it difficult for consumers to submit an application and they cannot, within the framework of a completed application, question whether the requested supplements are relevant or not”, FI writes.
In conclusion, the administrative authority states that “there is still a need to strengthen consumer protection” and states that it “will continue to work to improve access to payment accounts”.
After almost ten years as a customer of SEB, one of Sweden’s largest banks, the bank suddenly closed Linda’s three business accounts. Despite several emails and attempts at telephone contact, Linda has received no explanation from the bank as to why they have decided to close her accounts.
It was in 2014 that Linda bought Titans Sportbar in Norrköping together with her former husband. The purchase was made through their joint holding company, which was set up just before the purchase.
The business account for the sports bar was with the bank, SEB, and Linda therefore needed to go there and arrange contracts and various other things required for a business purchase.
SEB said that Linda needed to create a private account with them for everything to go through. She had both a house loan and the holding company in another major bank, but she still created a private account with SEB.
Customer knowledge
In 2015, they bought the Stopet nightclub. This time, Linda and her ex-husband needed to create a new business account for the nightclub, so she asked SEB if it was possible to open another business account with them. It went well and since then the businesses have been running smoothly. Linda has submitted all the KYC questions on time and has never had any loans or credits with SEB. Nor has she received or sent money abroad, something that Swedish banks have become increasingly reluctant to allow.
Last year, Linda and her current husband found a new premises in Norrköping that they liked and decided to start a third business, Lindas kula. Again, Linda applied for a business account with SEB and was approved in May 2024. At the same time, she decided to transfer the holding company to SEB, so that most of it would be gathered at the same bank, and last summer they opened the doors to Lindas Kula.
Everything went well for Linda and the three restaurants in Norrköping. In the fall, she received new questions about customer knowledge, where she as an entrepreneur must also send in account transactions, annual reports and questions about cash withdrawals. Everything was sent in as usual, the only thing that couldn’t be sent in was an annual report for Linda’s Kula, which had only been open for a few months.
In September this year, Linda received a message from SEB stating that they did not “understand” the answers received and that they would therefore close all commitments, i.e. all company accounts and also the holding company. She was asked to transfer the funds immediately to an account outside SEB. No further explanation was given at all. Linda was confused by the message and responded immediately.
“I have emailed in documentation on what you asked for?Or is there something you are missing?” she wrote in reply to the message.
No further explanation was given at all
No reply was received from the bank. Linda tried calling and emailing again, but no one answered.
Right to know why
Linda got in touch with the local branch manager of SEB in Norrköping, who did reply to her. The branch manager wrote that Linda of course had the right to know why her business accounts would suddenly be terminated after almost ten years as a customer, and the manager would contact the responsible department. However, despite numerous calls, the branch manager was unable to reach anyone in charge. As local bank branches do not own these issues, she was told that it was difficult for the branch manager to do more.
Linda also managed to get in touch by email with an employee at the local SEB office, who worked specifically with corporate issues, but she was not as helpful as the branch manager and only referred to the central support. When Linda called the phone number she was given, she was transferred to the wrong department.
The bank will send out letters
The manager also told Linda that when accounts are closed, SEB should send out three letters by post before the accounts are closed, but Linda has not received a single letter home. The bank is also supposed to contact the customer if they do not receive the right answer, which has not happened either.
Despite repeated attempts, Linda has not yet received a reply and her accounts were closed without any feedback from the bank. As a result of the closure of her business accounts, Linda was no longer able to accept card payments at her restaurants and could only accept cash.
– I have lost a lot of money in these weeks, for no reason whatsoever, Linda tells The Nordic Times. Photo: Private
Although it is usually extremely difficult for entrepreneurs to find a new bank after going through what Linda has been through, against all odds she has managed to find a new bank and saved her business, but she is still waiting for an explanation from SEB. A complaint has been made to the Swedish Financial Supervisory Authority and the Swedish Consumer Agency.
– It’s so sick that you can be treated this badly as an entrepreneur in Sweden, Linda concludes.
The crisis of confidence in banks
Linda’s experience is far from unique and has become symptomatic of how Swedish banks treat their customers, with vague references to “lack of customer knowledge” and by hiding behind their “customer knowledge department” without anyone being held accountable in practice. In its article series The crisis of confidence in banks, The Nordic Times documents how banks have devastated businesses and left individuals in desperate financial situations.
US banking giant Morgan Stanley is now under investigation by several federal regulators.
This time, its wealth management division is under scrutiny. Authorities say the bank neither knows nor seems to care where its wealthy clients’ money comes from.
In February, the investment bank was implicated in a money-laundering scandal in Venezuela and was investigated by the U.S. Department of Justice and the U.S. Securities and Exchange Commission, which oversees securities trading.
Now, the SEC and several other U.S. agencies have begun investigating Morgan Stanley’s wealth management division, and the Federal Reserve has also become involved, the Wall Street Journal reports.
They say the bank does not know enough about where its wealthy clients’ money comes from – and does not appear to be doing much to control it.
The authorities point out that the investment bank has not mapped the financial activities and histories of its clients, including international clients who are considered to be involved in various forms of suspicious or illegal activities.
Relies on revenues
At the same time, it is emphasized that the bank is dependent on the high revenues of its wealth management department and has been since the financial crisis of 2008 – this is also believed to be the reason why it did not bother to sufficiently check where the money actually comes from.
“The division generates stable revenue streams that Morgan Stanley relies on to smooth out downturns in investment, banking and trading”, Swedish business magazine Dagens PS points out.
Morgan Stanley has previously stated that it intends to cooperate fully with the US authorities in all cases related to money laundering.
38 municipalities in Sweden have no bank branches at all. Johan Grip, chief economist at Företagarna, says this is a “worrying development” that particularly affects small businesses.
Over the past 15 years, banks have closed 1,069 branches in Sweden, leaving 918, mainly in rural areas, and 38 of the country’s 290 municipalities have no bank branches at all, according to a survey by Bonnier-owned business newspaper Dagens Industri. This represents 13 percent of all municipalities and is growing, affecting many small businesses in rural areas.
– This is a very worrying development that is continuing. Wherever I travel in Sweden, small business owners testify to a sense of despondency, where closed offices and reduced interest from banks affect their business, Johan Grip, who is responsible for analyzing socio-economic issues important to businesses and entrepreneurship at the business organization Företagarna, told the newspaper.
“Maximizing profits”
Grip says there are several consequences for small businesses when the nearest bank branch is far away, including making it more difficult to get a bank loan.
– All lending is based on relationships and an understanding of local conditions, Grip says. That has been lost in many places.
Banks say this is due to increased digitalization and the fact that it allows them to provide the same service without being physically present. But Grip points out that it is more about increasing profits for the banks, and calls their actions “crass”.
– It would be more flattering if the banks could say that their actions are about maximizing profits. Instead, they want to see themselves as social institutions, which is a bit ridiculous, he says.
