The Swiss Financial Market Supervisory Authority (FINMA) said it has identified serious shortcomings in anti-money laundering processes regarding private clients at Gazprombank Switzerland.

According to FINMA, the bank “failed to carry out adequate economic background clarifications into business relationships and transactions with increased money laundering risks.” In view of the shortcomings identified in the bank’s AML control system, FINMA said it has banned Gazprombank from accepting new private clients until further notice, and existing relationships must be strictly monitored. Gazprombank Switzerland must also establish from among its board of directors a risk committee with a majority of independent members, FINMA added.

Investigation background. In 2016, following revelations from the Panama Papers, FINMA launched an investigation into more than 30 Swiss banks, focusing on their implementation of AML regulations. In-depth investigations were carried out at around 20 banks. Where necessary, FINMA required banks to improve their AML processes.

As part of this review, it opened enforcement proceedings against Gazprombank Switzerland relating to potential breaches of AML rules. Gazprombank Switzerland focuses primarily on corporate clients and particularly on trade finance and commercial lending. In its enforcement proceedings, FINMA examined how the bank had exercised its AML due diligence requirements for many business relationships involving private clients and politically exposed persons using offshore companies.

Inadequate clarification. FINMA’s investigation, completed in January 2018, found that Gazprombank Switzerland was in “serious breach” of its AML due diligence requirements from 2006 to 2016. In many cases, the bank’s risk categorization of its business relationships was incorrect or carried out too late.

“It failed to clarify the background of business relationships and transactions with the necessary depth and attention to detail,” FINMA stated. “The bank also failed to keep appropriate records of the transactions and relationships and frequently did not validate the documentation it obtained.”

FINMA said the bank also failed in some instances to report suspicious business relationships to the Money Laundering Reporting Office Switzerland (MROS) within an appropriate timeframe. The bank’s risk management and control functions, thus, showed serious shortcomings in the prevention of money laundering.

Many of these breaches related to relationships that were initiated by the bank’s predecessor institution, Russian Commercial Bank, prior to 2009. Although the bank “has taken various measures to improve its organization, risk management, and control functions,” FINMA stated, it nevertheless has been instructed to review and, to the extent necessary, modify its AML processes.

FINMA said it will closely monitor the implementation of these measures and those initiated by the bank itself, and has appointed an external auditor to supervise the process.

FINMA said the conclusion of its proceedings against Gazprombank Switzerland also marks the conclusion of FINMA’s activities linked with the Panama Papers. However, the prevention of money laundering will continue to be a key priority.

“Over recent years, FINMA has issued on average more than ten enforcement rulings a year imposing sanctions relating to money laundering and has taken a range of measures, including the dissolution of a bank; a license withdrawal from a fiduciary company; and the disgorgement of illegally generated profits,” the regulator said.

“FINMA has also enforced changes to governance structures at supervised institutions and set strict limits on certain new business activities,” the regulator added. “In the past years, FINMA has issued industry bans against eight bank managers following serious breaches of due diligence requirements. Between 2016 and 2017, FINMA launched enforcement proceedings against seven bank managers.”

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