Bankers Who Profited From Nordic Hiring Boom Now in Firing Line

A few years ago, the biggest banks in one of the richest corners of the globe were adding thousands of jobs to a department that suddenly seemed more important than most others: compliance.

But with headcount growing more than 10-fold in some cases, those same jobs are now at risk.

This month, Danske Bank A/S warned of “significant” cuts, with analysts betting at least 1,000 jobs will be axed, especially in compliance. Nordea Bank Abp says most of the 1,500 jobs it created to fight financial crime just a few years ago need to be automated to keep costs in check.

Mikael Bjertrup, head of Nordea’s financial crime prevention unit, says the bank hired a “huge number of people” in 2016 and 2017. But cuts are now under way, because “it’s simply too expensive,” he told Bloomberg.

Nordic banks beefed up compliance units in response to a wave of financial crime allegations. Most notably, Danske’s Estonian dirty-money affair, which is still being investigated by prosecutors across the globe.

“After the scandals the banks rushed to add people, since they couldn’t change technology overnight. The simplest way is adding more people,” said Sujata Dasgupta, Stockholm-based expert on financial crimes compliance at Tata Consultancy Services Ltd. But, she said, “there will be a rebalancing of labor: you might not need so many people in the first line, and there’s scope for automation.”

The Pandemic

The need to cut back is more urgent than ever after the Covid-19 crisis pummeled loan books and ate into profits. Analysts say compliance is an obvious area for cuts, after departments mushroomed quickly in the wake of scandals, often without much time to focus on efficiency.

Banks across the U.K., Germany, France, Italy and the Netherlands are seen spending $136.5 billion on financial crime compliance, up from around $85 billion in 2017. About 62% of the compliance budgets are spent on labor, down from 74% a few years ago, according to LexisNexis Risk Solutions Inc. Financial crime compliance processes and burdens boosted banks’ costs 7% annually during the past two years, with negative impact on productivity and winning new business, it said.

“Reversing the compliance-cost burden of the banks in the aftermath of the money-laundering scandal is likely to be key,” said Philip Richards, a senior analyst at Bloomberg Intelligence.

For Danske and Swedbank AB, two Nordic banks being investigated in the U.S. for their alleged involvement in money laundering, costs are up as much as 20% from 18 months ago, mostly due to extra spending on compliance, Bloomberg Intelligence estimates.

About 10% of Danske’s staff are now working to fight financial crime. That’s after the bank’s 2018 admission that much of about $230 billion in non-resident flows via an Estonian unit was suspicious.

Automating 80%

Nordea is still investing in compliance, but the focus is on technology, not people.

“We have programs that go through billions of transactions that generate millions of alerts. Around 80% of those alerts are processed by people, and that needs to be reduced,” Bjertrup said. “Over time, we will get to a situation where computers handle 80% of that work, and people 20%, but that will take several years.”

He said those alerts that still need to be handled manually are, to a large extent, being shifted from the Nordics to Poland and Estonia.

— With assistance by Christian Wienberg

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