Credit Suisse Hits Back At Claims That It Held Criminals' Money

Tom Burroughes Group Editor London 21 February 2022

Credit Suisse Hits Back At Claims That It Held Criminals' Money

The Swiss bank said that many of the accounts referred to by a cluster of news organisations had been closed years ago. More than half – 60 per cent – were shut before 2015, and the bank has taken action on a number of fronts. Credit Suisse is now seeking to move on from its losses and problems last year.

(Updates with share price reaction, comment.)
Credit Suisse, seeking to recover from losses over the past year, reacted furiously yesterday to a newspaper report claiming that it had received a “massive leak” supposedly showing that the bank harboured the wealth of clients involved in crimes including torture and money laundering. 

Yesterday, the Guardian website said details of accounts linked to 30,000 Credit Suisse clients all over the world are contained in the leak, which has unmasked the beneficiaries of more than SFr100 billion ($108.6 billion).

The bank argued that many of the accounts referred to had been closed years ago. More than half were shut before 2015.

The UK newspaper said “the leak points to widespread failures of due diligence by Credit Suisse, despite repeated pledges over decades to weed out dubious clients and illicit funds.” The newspaper said it is part of a consortium of media outlets given exclusive access to the data. The trove of banking data was leaked by an anonymous whistleblower to the German newspaper Süddeutsche Zeitung. “I believe that Swiss banking secrecy laws are immoral,” the whistleblower source said in a statement.

Shares in Credit Suisse were down around 3.6 per cent around 14:00 UK time, at SFr7.99 per share.

Yesterday, the bank said: "Credit Suisse strongly rejects the allegations and insinuations about the bank’s purported business practices. The matters presented are predominantly historical, in some cases dating back as far as the 1940s, and the accounts of these matters are based on partial, inaccurate, or selective information taken out of context, resulting in tendentious interpretations of the bank's business conduct. While as a matter of law Credit Suisse cannot comment on potential client relationships, we can confirm that actions have been taken in line with applicable policies and regulatory requirements at the relevant times, and that related issues have already been addressed.

“Following numerous inquiries by the consortium over the last three weeks, Credit Suisse has reviewed a large volume of accounts potentially associated with the matters raised. Approximately 90 per cent of the reviewed accounts are today closed or were in the process of closure prior to receipt of the press inquiries, of which over 60 per cent were closed before 2015. Of the remaining active accounts, we are comfortable that appropriate due diligence, reviews and other control related-steps were taken in line with our current framework. We will continue to analyse the matters and take additional steps if necessary."

The bank said it noted that the consortium of news organisations referred to a “large number of external sources including those previously known as well as an alleged leak in their reporting. We take this latter allegation very seriously and will continue with our investigations with an internal task force including specialist external experts. We have robust data protection and data leakage prevention controls in place to protect our clients,” it said. 

The claims are a blow to Switzerland, still home to trillions of dollars of cross-border financial flows. Ironically, while it has suffered the loss of bank secrecy for about a decade – at least as it relates to foreigners’ accounts – the country’s political and economic stability continues to keep operating as a prominent financial centre. Woes in financial hubs such as Hong Kong, for example, have underscored Switzerland’s advantages. 

The reports also come almost a decade after Switzerland signed a sweeping pact with the US under which dozens of Swiss financial groups signed non-prosecution agreements in exchange for paying penalties for operating secret accounts for wealthy Americans. (See examples here.) Swiss banks continue to be hit by controversy, however. They have locked horns with regulators in countries such as Singapore (as in the case of two banks, BSI and Falcon Private Bank, being kicked out of that city-state amid the 1MDB scandal. See stories here and here.) Negative official interest rates in Switzerland, and rising client expectations and tech spending requirements, have added to pressures.

The claims about Credit Suisse are damaging as it tries to move on from losses sustained by the Greensill and Archegos sagas of a year ago. In 2021 it also settled a case with former senior banker Iqbal Khan, who left to join UBS, over claims that it had spied on him. The story appeared more akin to a thriller than the staid world of private banking. A number of senior figures left the bank, including CEO Tidjane Thiam.

The bank claimed that the allegations against it “appear to be a concerted effort to discredit not only the bank but the Swiss financial marketplace as a whole, which has undergone significant changes over the last several years.”

“In line with financial market reforms across the sector and in Switzerland, Credit Suisse has taken a series of significant additional measures over the last decade, including considerable further investments in combatting financial crime. Across the bank, Credit Suisse continues to strengthen its compliance and control framework and, as we have made clear, our strategy puts risk management at the very core of our business,” it said.

Over the past decade or more, regtech firms and banks themselves have sought to make the business of onboarding clients, and avoiding falling foul of AML controls, easier to carry out. The business of ensuring compliance with such rules has become an industry in itself.

The Guardian report claimed that the individuals involved in the data leak file include a “human trafficker in the Philippines, a Hong Kong stock exchange boss jailed for bribery, a billionaire who ordered the murder of his Lebanese pop star girlfriend and executives who looted Venezuela’s state oil company, as well as corrupt politicians from Egypt to Ukraine.”

“One Vatican-owned account in the data was used to spend €350 million in an allegedly fraudulent investment in London property that is at the centre of an ongoing criminal trial of several defendants, including a cardinal,” the newspaper said.

Such leaks have echoes of the Panama Papers, Pandora Papers and Paradise Papers leaks, handled by the Washington DC-based International Consortium of Investigative Journalists, of recent years. Those episodes focused on data extracted – in ways the consortium has not disclosed – from places such as Panama and the Bahamas, among others. (In that case, the consortium was careful to state that the persons whose data was leaked were not necessarily guilty of a crime. These episodes were discussed by WealthBriefing here.)

To see another story about the demise of Swiss bank secrecy internationally, click here. Swiss federal regulator FINMA has punished banks for anti-money laundering lapses, as reported here. The Federal Tax Administration in 2018 said it had for the first time exchanged financial account data at the end of September under global standards designed to foil tax dodgers. About 7,000 banks, trusts, insurers and other financial institutions registered with the FTA to collect data on millions of accounts and send them on the Swiss tax agency. 

Lessons and reactions
Donald Gillies, Head of PassFort, a Moody's Analytics firm that looks at issues such as client onboarding, said: “For financial institutions as large as Credit Suisse, KYC procedures are of such a scale that errors are bound to happen. We’re demanding compliance professionals to constantly be perfect, a wholly unrealistic goal to ask of an individual, which is bound to lead to these nefarious people successfully onboarding into financial institutions. Individuals cannot take responsibility in silos and technology has to play a role in managing and monitoring activity.

“The goal here, however, is not merely to improve KYC procedures, but to stop financial crime wherever possible. Without their finance being legitimised by institutions without the right checks in place, the likes of human traffickers and corrupt politicians will find it increasingly difficult to get away with their crimes," Gillies said. 

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