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FINMA urges Credit Suisse to improve money laundering checks

posted onSeptember 17, 2018
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Credit Suisse, Switzerland’s second-biggest bank, infringed its anti-money laundering supervisory obligations relating to soccer’s governing body FIFA, the Brazilian state oil company Petrobras and the Venezuelan oil corporation PDVSA, the afluent Alpine nation's financial watchdog FINMA said on Monday. 

“The identified shortcomings occurred repeatedly over a number of years, mainly before 2014” FINMA said,  adding that “an above-average number of faults were discovered in business relationships opened by the former Group subsidiary Clariden Leu AG” which was fully merged into Credit Suisse in 2012. 

The bank also fell short of its obligations to fight corruption while managing “a significant business relationship” with a politically exposed person. “In this instance too, FINMA identified deficiencies in the anti-money laundering process, as well as shortcomings in the bank's control mechanisms and risk management” the Swiss authority said.

The bank's response 

Credit Suisse said in a statement Switzerland’s financial regulator had uncovered “legacy cases across the Swiss banking sector”, adding it has taken a number of actions to continuously improve and strengthen compliance since 2015, when Chief Executive Tidjane Thiam took over from his predecessor, Brady Dougan.

In October 2015, Credit Swiss separated its Legal and Compliance units, creating a dedicated Group Compliance and Regulatory Affairs unit that reports directly to the CEO, with a new Head sitting on the Executive Board. The firm also hired over 800 compliance specialists in less than three years and the bank’s board of directors plans to establish a dedicated Compliance, Conduct and Culture Board Committee 

FINMA will commission an independent third party to oversee the Zurich-based lender's anti-money laundering processes but it has no authority to fine banks it supervises. 

It has also decreed additional measures to complement the bank’s actions and restore full compliance with the law. These measures are designed to further improve the bank’s governance, organisation and risk management in the wealth management business. 

Credit Swiss Chief Executive Tidjane Thiam
Credit Swiss Chief Executive Tidjane Thiam

Problems of the past

Analysts said the watchdog's harsh tone and the instalment of an independent auditor are a blow to the bank’s reputation, denting confidence in its efforts to fix problems of the past. 

In November 2017, Credit Swiss agreed to pay a $135 million fine over its conduct in a foreign exchange scandal involving a series of Wall Street banks.

In February 2018, former Credit Suisse client adviser Patrice Lescaudron -who had no financial industry experience before joining the bank-was sentenced to five years imprisonment by a Geneva court. He was charged with fraud, forgery and criminal mismanagement. Lescaudron admitted in court to having falsified trades and hidden mounting losses. 

Most recently, in July, the bank  agreed to pay $77 million in aggregate to the U.S. regulators to put an end to investigations related to the alleged violation of the Foreign Corrupt Practices Act (FCPA). The bank was accused of hiring the relatives of Chinese officials, with an aim to win banking deals. 

A 162-year-old financial institution

Credit Suisse Group AG, founded in 1856, is headquartered in Zürich, and maintains offices in all major international financial centres. It is a member of Wall Street's bulge bracket, a list of the largest and most profitable multi-national investment banks in the world whose banking clients are normally huge institutions, corporations, and governments. 

According to The Wall Street Journal, "Credit Suisse survived the credit crisis better than many competitors." The Swiss lender is known for its strict bank–client confidentiality and banking secrecy practices.

“We sell [bank] safety not bank secrecy. Being a safe haven in a world that is becoming increasingly dangerous and volatile is no bad place to be." Thiam said in a 2018 interview with the Bloomberg Markets.

In 2017, Credit Suisse had CHF 1.376 trillion of assets under management, an increase of 9.9% from 2016. It employs approximately 45,430 people.  

The registered shares (CSGN) of Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. In Zurich, the shares fell 0.1 percent at 0840 GMT this morning, in line with the benchmark Swiss Market Index.