Credit Suisse this week became the first major Swiss bank to be prosecuted for money laundering in the country after the Federal Criminal Court of Switzerland found the bank guilty of washing money connected to a Bulgarian drug smuggling syndicate.
The court Monday ruled Credit Suisse had deficiencies in client vetting and anti-money laundering (AML) controls. It fined the bank 2 million Swiss francs (U.S. $2.1 million) and ordered it to repay CHF 19 million (U.S. $19.7 million)—the same amount the bank is thought to have profited from the scheme—in compensation to the Swiss government.
A former Credit Suisse client manager received a 20-month suspended prison sentence, along with a suspended fine for aggravated money laundering between July 2007 and December 2008.
The penalties for both the bank and the unnamed employee were reduced because the crimes took place 14 years ago.
According to the Federal Prosecutor’s Office, the client manager allowed Bulgarian drug traffickers to launder CHF 55 million (U.S. $57 million) over four years from 2004-08. Red flags, such as depositing bags stuffed with cash, were ignored or went undetected.
“Convictions have been few and far between, so this criminal conviction of Switzerland’s second largest bank will send shudders through legal and compliance departments across the Swiss banking sector,” said Samar Pratt, leader of risk consultancy Exiger’s financial crime compliance advisory practice.
In a statement, Credit Suisse said it “is continuously testing its anti-money laundering framework and has been strengthening it over time, in accordance with evolving regulatory standards. Generating compliant business growth in line with legal and regulatory requirements is key for Credit Suisse.”
The bank plans to appeal the sentence, “based partly on the argument the crimes belong to an era … when compliance standards were notably less stringent,” according to Bambos Tsiattalou, partner at law firm Stokoe Partnership Solicitors.
It is only the second time in Switzerland a bank has been found guilty of “organizational failure.” The first occurred in 2021, when the Abu Dhabi-owned and Zurich-based Falcon Private Bank was fined CHF 3.5 million (then-U.S. $3.8 million) for failing to set up adequate AML controls.
A range of other banks are under criminal investigation: PKB PrivatBank, Banque Cramer & Cie, and J. Safra Sarasin are being probed for their roles in a suspected money laundering scheme involving Brazilian state-owned oil company Petrobras, while Lombard Odier is being investigated for laundering funds for Gulnara Karimova, the daughter of former Uzbekistan leader Islam Karimov.
Few believe Credit Suisse’s prosecution will signal a tougher enforcement approach for Switzerland.
“It’s highly unlikely fines alone—especially when imposed years after the fact—will stop the prevalence of cases similar to that of Credit Suisse.”
Max Heywood, Head of Public Sector, Elucidate
Swiss nongovernmental organization Public Eye contended the fine was too low (prosecutors pushed for CHF 5 million), the resolution too slow, and the full extent of the money laundering was not explored because the investigation was “time barred” to 15 years, so suspicious activity going back to 2004 was not included.
It called for Switzerland’s financial regulator, the Financial Market Supervisory Authority (FINMA), to have tougher investigatory and enforcement powers.
“While this verdict is a warning to the Swiss financial sector … Switzerland must strengthen the enforcement tools at FINMA’s disposal and set really deterrent fines,” the organization stated. It added the country’s legal system “does not make it possible to fight against money laundering effectively” and it “must strengthen surveillance systems and introduce deterrent penalties” if it wants to “stop maintaining its financial center as a haven for economic crime.”
Max Heywood, head of public sector at financial crime risk specialist Elucidate, said the ruling should deter Credit Suisse and other banks from being involved in similar cases and set a precedent for banks globally, serving as another benchmark for what will and will not be tolerated in the financial sector.
“The reality is large banks are regularly and repeatedly embroiled in legal cases linked to financial crime, with limited evidence sanctions are working to change behaviors,” he added.
“It’s highly unlikely fines alone—especially when imposed years after the fact—will stop the prevalence of cases similar to that of Credit Suisse,” said Heywood. “A global reset in how both regulatory bodies and banks deal with financial crime risk is needed, going beyond penalties to put in place more direct incentives to stop dirty money.”
Heywood believes poor enforcement and prosecution records mean financial institutions will continue to launder dirty money, despite the European Union’s attempts to stamp out financial crime in the wave of a series of scandals.
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