The Finnish Financial Supervisory Authority (also known as FIN-FSA or Fiva) has fined S-Bank 980,000 euros over negligence in its customer oversight, also known as 'know your customer' (KYC) procedures. They are aimed at blocking financial institutions from being used to launder ill-gotten money or to fund terror groups.
S-Bank's "risk-based approach has not been sufficiently comprehensive to meet the requirements of the Act on Detecting and Preventing Money Laundering and Terrorist Financing nor had it obtained adequate customer due diligence data", the watchdog said on Wednesday. Fiva also found problems with the bank's IT systems and processes.
Biggest bank owned by biggest retailer
S-Bank has Finland's largest number of customers, more than three million. It is mostly owned by the S Group, the country's biggest retailer.
Fiva also issued a warning to an S-Bank subsidiary, FIM Asset Management, for insufficient KYC data on its customers.
However the FIN-FSA added that it "has no reason to suspect that money laundering offences referred to in the Criminal Code have been committed" in the operations of S-Bank or FIM Asset Management.
S-Bank: Bonus collectors unlikely to be money launderers
Jussi Sokka, the bank's vice president for legal, compliance and risk issues, said that the lender takes the matter very seriously.
"Although we do not entirely agree with the Financial Supervisory Authority, we accept the decision. From our point of view, for instance, those customers who have accounts at S-Bank merely in order to collect [S Group retail] bonus points pose a significantly lower risk of money laundering," he said in a statement on Wednesday.
Sokka told Yle that S-Bank tracks its customers' payment behaviour through various channels, including the S bonus system, as part of its KYC procedures.
Nordea and other banks operating in Finland have been accused of turning a blind eye to money laundering.