Compliance

Credit Suisse Settles With US, Switzerland And UK Over Mozambique Deals

Tom Burroughes, Group Editor, 21 October 2021

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The settlements resolve probes into the bank’s arrangement of loan financing for Mozambique state enterprises and related securities transactions which happened between 2013 and 2016.

This week Credit Suisse agreed to pay $475 million and overlook $200 million which Mozambique owes investors in a range of settlements with US, Swiss and UK regulators over loans that the Swiss bank made to the African nation. 

The saga adds to other blows the bank suffered from the Archegos and Greensill affairs. Those losses have been followed by a number of senior management changes. Due to report its third-quarter financial figures on 4 November, Credit Suisse said it expects to take $230 million in charges in the third quarter 2021.

The settlements resolve probes into the bank’s arrangement of loan financing for Mozambique state enterprises and related securities transactions which happened between 2013 and 2016, it said in a statement earlier this week. 

The Zurich-listed bank said that it had also noted the (19 October) announcement by Swiss national regulator FINMA that it has concluded its enforcement proceedings related to past observation activities. 

“The bank condemns any unjustified observations and has already taken decisive steps to strengthen its relevant governance and processes,” it said. 

In terms of loan financing for Mozambique, Credit Suisse Group has entered into a three-year deferred prosecution agreement with the US Department of Justice and consented to entering a cease and desist order by the US Securities and Exchange Commission. 

Under the terms of the DPA, Credit Suisse will continue its compliance enhancement and remediation efforts, report to the DoJ on those efforts for three years, and undertake additional measures, as outlined by the resolutions. In addition, Credit Suisse Securities (Europe) Ltd has pleaded guilty to one count of conspiracy to violate the US federal wire fraud statute. CSSEL will be bound by the same obligation as Credit Suisse under the DPA. The total monetary aspect of the DOJ and SEC settlements, taking into account various credits for overlapping penalties, is around $275 million.

In the resolution with the UK’s Financial Conduct Authority, the bank agreed that in respect of these transactions with Mozambique between 2013 and 2016, its UK operations had “failed to conduct its business with due skill, care and diligence and to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.” 

The bank said it will pay a penalty of about $200 million; it has also agreed with the FCA to forgive $200 million of debt owed by Mozambique.

In its ruling, the Swiss Financial Market Supervisory Authority (FINMA) said that Credit Suisse had violated its duty to file a suspicious activity report (SAR) as the filing in 2019 was considered too late. It also noted that Credit Suisse did not pay enough attention to the risks arising from specific sovereign lending transactions, and has ordered the bank to remediate all deficiencies identified by 30 June 2022. FINMA has imposed a business restriction until an implementation auditor has reviewed and approved all measures taken based on the current ruling.

“In addition to the known observation of two former executive board members, a small group of former executives within the bank planned and mostly executed five further observations of former employees or third parties, all outside Switzerland, between 2016 and 2019. The majority of the additionally conducted observations served to protect the physical safety of employees. The regulator criticised the bank’s decision-making, documentation and supervision of the observations and the lack of internal regulations. The deficiencies in documentation were partially due to the fact that communication took place via external channels that were not authorised by the bank,” Credit Suisse said.

“As stated previously, Credit Suisse condemns any unjustified observations and has adopted a series of measures, with observations prohibited unless required for compelling reasons such as threats to the physical safety of employees. The bank has already improved its governance and processes in the security area and has also taken steps to enforce the correct usage of electronic communication. FINMA considers these measures in principle suitable to remedy the deficiencies identified and complemented them with limited additional requirements,” it said. 

“The bank also regrets that it initially failed to ensure all relevant information was readily available and hence provided to the regulator in a complete manner,” it concluded.

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