Switzerland’s federal prosecutor has filed criminal charges against Credit Suisse for allegedly facilitating money laundering “on a grand scale” by former Bulgarian clients.
In an indictment put before Switzerland’s Federal Criminal Court on Thursday, investigators said the bank had processed more than SFr140m ($158m) of transactions for a clan of mafiosi and former top-level wrestlers earned from smuggling tonnes of cocaine into Europe and other illegal activities.
The bank said in a statement that it noted the charges with “astonishment” and promised to “defend itself vigorously”. Its legal team is “very confident” it will prevail in the case, according to one senior executive.
The prosecutors’ indictment alleges that a senior relationship manager at the bank systematically ignored or sidestepped money-laundering reporting requirements between 2004 and 2008 to aid the criminal group.
The woman has been separately indicted, but her identity has not been disclosed. The individual no longer works at Credit Suisse but is being supported by the bank in the legal case because it is “convinced” of her innocence.
The probe has been in progress for more than a decade, Credit Suisse pointed out, during which prosecutors’ original accusations have been wound back as various lines of inquiry have hit legal walls or failed to turn up evidence.
The maximum penalty that can be ordered against the Swiss lender is a fine of SFr5m and the disgorgement of profits, the bank added.
The indictment is the latest episode in a string of woes for Credit Suisse. At the height of the coronavirus pandemic in the spring, it was caught up in scandals at Luckin Coffee and Wirecard, having worked on deals for both. The Swiss bank also launched an internal review over its supply chain finance funds linked to SoftBank and Greensill Capital.
“2021 is the new era for Credit Suisse where we want to go into offence and we want to grow,” Thomas Gottstein, chief executive, told the Financial Times ahead of an investor day on Tuesday. “This has to be all done with discipline across risk, compliance and cost.”
The Bulgarian money-laundering case began as a cause célèbre for Swiss prosecutors, who made little secret of the fact that they intended the investigation to be a landmark in the country’s law enforcement.
A Swiss bank has never been found guilty of criminal actions — a so-called section 102 prosecution under the country’s criminal code.
Like several other high-profile white-collar investigations in recent years in the wealthy alpine state, however, the probe has been dogged with difficulty. Three separate prosecutors have now handled the case.
The hearing before the criminal court is unlikely to take place until the third quarter of next year at the earliest. A subsequent appeal from either side to the Swiss Supreme Court could mean that the process will drag on into 2022.
The charges describe a chaotic and unstructured process at Credit Suisse more than a decade ago for grouping together suspicious transactions and identifying the beneficial owners of accounts and other financial instruments.
“Credit Suisse had been aware of these deficiencies from at least 2004,” the federal prosecutor said in a statement. “The fact that the bank let it continue until 2008, or even beyond, impeded or frustrated the detection of the money-laundering activities carried out by the criminal organisation with the aid of the bank executive.”
The federal prosecutor added that, even after it first issued freezing orders for accounts and transactions in 2007 relating to the Bulgarian group, Credit Suisse’s internal controls were so “dysfunctional” that a further SFr35m was drained from accounts before the bank acted to curb its clients’ activities.
Credit Suisse’s lawyers, however, believe the bars to proving wrongdoing will be incredibly hard, if not impossible, for prosecutors to surmount.
The Bulgarian clients involved operated a large property business in Bulgaria, which continues to legally trade, and which was the source of the funds deposited in Swiss accounts, according to Credit Suisse’s lawyers.
In its statement, Credit Suisse additionally said the chief allegations against its corporate failings to police its clients were “based on rules and principles that did not exist at the relevant period”.
So-called ‘single client view’ practice, for example, according to which a bank must aggregate together all the business it does for clients to truly understand exactly who is benefiting behind complex financial structures and offshore arrangements, was not required of Swiss banks at the time. Credit Suisse was one of the first Swiss institutions to implement the standard in 2016.
“It is like complaining that an iPhone 1 does not have all the features of the iPhone 12,” said one Swiss lawyer familiar with the case against the bank.
An independent legal review was commissioned by Credit Suisse in 2016 into its processes at the time of the allegations. The review found no evidence of wrongdoing or deficiency.
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