* Nordea says did not fully know its customers in some cases
* Bank fined last year by watchdog for such deficiencies
* Bank says no evidence it proactively helped tax evasion
* Second-quarter operating profit 1.22 bln euros (Adds further CEO comment, FSA and analyst comment)
By Johan Ahlander
STOCKHOLM, July 20 (Reuters) - Nordea, the Nordic bank named most in the Panama Papers, conceded on Wednesday it had not always done enough to safeguard fully against crimes such as money laundering and said it was taking steps to avoid any repeat.
The region's biggest lender said an internal investigation found many of the cases it had reviewed fell below the bank's standards for verifying the identity of clients, crucial for preventing money laundering or the funding of militant groups.
"Governance and controls have not been in place in the way they should," Chief Executive Casper von Koskull told Reuters. "It's unacceptable."
Von Koskull replaced Christian Clausen as CEO in November and vowed to get to the bottom of Panama Papers tax evasion scandal when it broke in April.
He said Nordea had decided to take a number of steps, including tighter control over its Luxembourg subsidiary where many of the offshore accounts had been set up.
The bank, which had been fined by Swedish regulators for lax controls even before the Panama Papers scandal, said it had blocked 68 suspicious accounts and would not assist clients with the administration of offshore structures in future.
"It looks like they have done what they needed to do," Exane BNP Paribas banking analyst Andreas Hakansson said. "They highlighted some errors and the need for change."
Nordea's investigation covered 2010 to 2016 but the bank said only a small number of cases took place after 2013.
The Swedish Financial Supervisory Authority (FSA) harmonised its rules with European Union regulations in August 2014, meaning offences committed afterwards could lead to substantially harsher penalties.
Instead of a maximum 50 million Swedish crowns ($5.8 million), the penalty can now reach 10 percent of revenues, or about 1 billion euros for Nordea.
In May 2015, the FSA said the flaws it had uncovered were serious enough to revoke Nordea's banking licence but it settled for a severe warning and the maximum 50 million crown fine.
The FSA welcomed Nordea's report of its findings and said the watchdog's own investigation into issues related to the Panama Papers was on track to be completed this year.
Nordea, whose shares have lost almost a fifth of their value this year, was one of the most frequently named lenders in the Panama Papers, where documents appeared to show it had helped clients back-date documents and set up offshore accounts.
The bank said, however, that it found no evidence employees had aided in customer tax evasion.
"I'm comforted by the conclusion that no evidence has been found that Nordea employees have proactively contributed to tax evasion," von Koskull said.
The bank has also been in the spotlight after a leaked FSA study suggested Nordea had underestimated risks in its corporate lending and needed as much as 80 billion crowns in new capital to meet regulatory demands.
The watchdog said last month the study had significantly overstated the capital need but noted its evaluation of internal models at Sweden's top banks, due later this year, would result in higher capital requirements.
Nordea, a rival of Swedbank, Handelsbanken and SEB, reported better than expected second-quarter operating profit on Wednesday and said its net interest margin was expected to improve during the second half.
Operating profit for the period was 1.22 billion euros ($1.34 billion) compared with an average forecast of 1.16 billion in a Reuters poll and 1.24 billion a year earlier.
Nordea shares were up 2.5 percent by 1137 GMT, outpacing a 1.1 percent in the European sector index.
($1 = 0.9082 euros)
$1 = 8.6102 Swedish crowns Additional reporting by Helena Soderpalm and Daniel Dickson; Editing by Niklas Pollard and David Clarke