Compliance pushed up corporate agenda in the Nordic region following recent scandals

Over the past few years, a number of Nordic countries have come under the spotlight following high-profile financial crime investigations, the most prominent cases being the Danske Bank and Swedbank money laundering scandals.

This month, the IMF announced it would conduct an independent review of money laundering and terrorist financing threats to Nordic and Baltic financial sectors, at the request of the countries themselves. How did local companies react to the recent scandals and how has the compliance environment evolved over the past few years?

Aperio interviewed the founders Nordic Business Ethics (NBE), Anna Romberg and Niina Ratsula, to find out more about NBE’s initiatives and the compliance sector in the Nordic region.

1. How would you describe the financial crime compliance and due diligence sector in the Nordic region and how has it evolved in the past 10 years? There has been a dramatic change during the last ten years. Ten years ago, hardly any non-financial sector company had a compliance function, and no-one talked about ethics and compliance. Today this topic is high on the agenda, thanks to several high-profile scandals. The Telia scandal, that started boiling over in 2012, is a watershed moment in this regard. Telia openly talked about its failures, but also about the investment in ethics and compliance. Since then, the community of ethics and compliance professionals has increased.

2. What effect did the Swedbank and Danske Bank scandals have on Nordic companies and how is it going to influence company policies with regards to AML compliance? These scandals have been a good reminder that ethics and compliance cannot be treated in isolation. Although the compliance programmes in these banks have been proven ineffective, it is not so that there was nothing in place, as, for example, in the Telia case. These banks had hundreds of compliance officers, policies, processes and controls. What was missing was the ethical considerations, a disregard for red flags, a culture of downplaying the risks and a lack of understanding of the local context. It is pretty obvious in hindsight that the lucrative growth in the Baltic markets could not only have been spurred by regular workers taking a mortgage. The signals were there, however, they were suppressed and ignored. That is why compliance work must be supported by working with business ethics and the corporate culture as well.
    
3. Why was the region so vulnerable to such scandals and what lessons have been learnt? Are there any remaining weak links? There has been an overreliance on the idea that ‘good Nordic values’, supported by strong institutions, automatically translate into ethical business practices overseas. There has been a lack of understanding that good people make bad decisions when put into the wrong context. We have not been trained in critically assessing red flags and being suspicious, we are raised to trust our neighbour and assume the best in everyone. You should trust, but also verify. We also see in our survey that Nordic employees are very hesitant to intervene when they witness ethical misconduct, as in the 2020 survey 62 percent of the respondents who had witnessed something unethical did not intervene. This is up from 47 percent in 2019.
    
4. How can the region rebuild its reputation? By being honest about our shortcomings and build upon our Nordic values, which in fact are unique. We have strong institutions, an independent media, people can in general be trusted and do rarely cheat on their taxes. We should leverage this trust and transparency in a business context, but must understand that it has to be supported by formal processes and controls, and we also have to learn to talk about the difficult issues and speak-up.
    
5. What are the key financial crime threats for companies in the Nordics?  This depends on the industry and whether the company operates domestically or internationally, and especially on emerging markets. In domestic business, key risks relate to public procurement and conflict of interest. The public sector is large and societies are small. Everybody knows everyone, so you must be mindful of this. In international business one risk is criminal conduct by business partners. Nordic companies commonly work with a lot of business partners when doing business overseas, such as agents, dealers and distributors. Historically many companies have not understood that these business partners are the extended arm of your company, and that a formal contract with a compliance clause will not save you if criminal conduct occurs.
    
6. What recent local legislation has (or will have) the biggest effect on corporate ethics and compliance processes? This is yet to be seen. The legislation is lagging behind in terms of formal recognition of ethics and compliance programs. The EU whistleblowing directive will have a huge effect in terms of internal investigations and non-retaliation work.
    
7. What is the general company culture when it comes to financial crime compliance in the Nordics and how is it evolving? If it is changing, is that likely the result of regulatory restrictions or public pressure? The changes that have happened are not so much due to local legislation, but more a result of extraterritorial legislation such as the FCPA, UK BA and Sapin II. The media has played a central role as well. Most companies are more afraid of ending up in a media storm than being targeted by local enforcement. Local enforcement is still lagging, which also is something that the OECD frequently points out.
   
   
8. The Nordic region is perceived to have a strong corporate compliance culture. Could you comment on how public perceptions and reputational risks play into corporate compliance strategies in the region? Nordic countries are perceived to have low levels of corruption in the public sector, i.e., TI CPI, which should not be misinterpreted as strong corporate compliance cultures. This is a myth that we are aspiring to bust with the Survey. We do see that ethical misconduct is frequent in Nordic workplaces, that employees do not speak up and that the most common reason for not speaking up is that the employees do not think it would make a difference. We have a culture of conforming, of being nice and do not want to be perceived as the difficult person. This is a key issue that companies have to work with.

9. What are your thoughts on the KYC platform set up by a joint venture of six Nordic banks? How effective is such a joint venture likely to be in the fight against financial crime? Industry collaborations are a great tool to fight financial crime. It is not effective that each company has to invest in technology and then run searches on the same parties, especially if these parties are ‘bank hopping’. The more information that is shared, the more effective the programmes will be.
   
   
10. The IMF announced at the end of 2019 that it would be examining Nordic efforts to stop money laundering – what are the likely outcomes of this review? Let us wait for the IMF report to see the outcomes. It will be interesting to see whether they focus on formal work, or follow the lead of the US DOJ to consider more informal aspects such as culture and leadership as well.
     

The Nordic Business Ethics is a North European business initiative that aims to raise awareness around ethics and integrity in business and provides tools for building stronger and more responsible companies. Through webinars, events, reports and other activities, it provides insights relating to best practice in business ethics. NBE was founded in 2019 by Anna Romberg and Niina Ratsula. Anna Romberg is a corporate governance, compliance and anti-fraud expert. She was responsible for the Anti-Bribery programme at Telia Company and has supported numerous global companies with governance and compliance related matters as an executive and through her own business. As of October 2020 she serves as Executive Vice President of Legal, Compliance and Governance at Getinge.

Niina is an ethics, compliance and governance professional, with a strong focus on corporate cultures and internal control. Niina spent 12 years in multinational corporations (Nokia and Kemira) focusing on ethics, compliance, internal controls and audit. In 2018 she started her own business, Code of Conduct Company, and is now supporting organisations in building their ethics and compliance programmes, ethical leadership and internal control projects. Niina was awarded recognition as the ‘responsible business influencer’ in Finland in 2019.

One of NBE’s key initiatives, the Nordic Business Ethics Survey, is a pioneering survey into employees’ views on ethics across multiple business sectors and job roles. The Survey was conducted for the first time in January 2019 and covered Finland, Norway and Sweden. The 2020 edition was extended to Denmark and includes the responses of 4,000 individuals

Aperio Intelligence is a London-based global risk consulting business with practice areas focused on enhanced due diligence, investigations, strategic intelligence and ESG-related advisory services. Aperio has strong links with the Scandinavian business community and has worked with some of the region’s most well-known companies. Paul Doran, who leads Aperio’s investigations practice, was based in Oslo for four years as Vice-President and Global Head of Investigations for Telenor ASA.

The Nordic Business Ethics Survey

The Nordic Business Ethics Survey is a pioneering survey into employee perceptions of ethical behaviour in Nordic workplaces. The survey was initially conducted in 2019. The ambition of the survey is to advance the dialogue around ethical culture and ethical leadership within our workplaces. Having worked with multinational corporations, small- and medium-sized companies, government-owned organisations and municipalities for over a decade, we know that maintaining proper business ethics is easier said than done. Organisations and their leaders do want to be ethical, and a majority of the respondents in this survey do believe ethical business is financially rewarding, but how does this translate to organisational realities?

The 2020 survey takes another step towards being a true Nordic snapshot of our business realities by adding Denmark to the scope. In addition, we have increased the number of respondents from 500 per country to 1,000 respondents per country, adding up to 4,000 respondents in total. Similar to last year, the survey was conducted by Kantar with the generous support of Forensic Risk Alliance. The responses were gathered towards the end of February 2020, when the world had not fully been thrown into a health crisis of global proportions.

One key finding is that ethical concerns are very common in our workplaces and that the most common response, when witnessing ethical misconduct, was to not intervene. Although the majority of the respondents say that they would feel comfortable speaking up about ethical concerns, mistakes and policy violations show that we refrain from doing so in reality. The most common reasons for not speaking up was again a scepticism that it would make any difference.

Even if we in our Nordic countries have a great tradition of ethical behaviour with a high level of trust in public institutions, low levels of perceived corruption within the public sector and a free media, we cannot become complacent. If we want to continue to be role models of transparency and integrity, we need to understand the complexities around doing business ethically and allow for difficult discussions in the grey zone. We hope that you will gather insights from the report and it will encourage you to discuss them within your organisation, with your manager, leadership team and board. Reflect upon how you personally contribute to an ethical culture at your workplace: do you speak up when you witness ethical concerns, do you compromise when under pressure from your manager, are you aware that even you can become ethically blind? We look forward to hearing your comments and feedback! Read more about us at nordicbusinessethics.com.

If you have any questions regarding NBE, please contact hello@nordicbusinessethics.com
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