Switzerland-based investment bank Credit Suisse has been fined $2.1 million and forfeited $12.5 million of assets held in cocaine trafficking accounts after the country’s Federal Criminal Court convicted the bank of failing to prevent money laundering.
In the first criminal trial of one of its major banks, Switzerland found a Bulgarian cocaine trafficking gang and a former bank employee guilty of money laundering from 2004 to 2008. Testimony included murders and cash stuffed in suitcases.
The former employee testified that the bank paid almost no attention to compliance in its rush to win rich Eastern European clients.
The court on Monday, June 27 handed the former employee a suspended 20-month prison sentence and a fine for money laundering, saying she was the bank’s “first line of defense” and failed in her duty. She is accused of helping to conceal the criminal origins of more than $152 million in transactions, including $44 million in cash, some of it stuffed into suitcases.
The trial is seen as a test case for prosecutors taking a tougher stance against the banks in Switzerland, which are famous for offering low levels of financial risk and high levels of privacy. Switzerland made it a crime in 1934 for Swiss banks to disclose the name of an account holder.
Switzerland’s first and second-largest banks, UBS and Credit Suisse account for more than half the total deposits in the country. Credit Suisse has faced billions in losses due to risk-management and compliance faux pas.
Credit Suisse shares are down more than 40 percent in the past year.
The court said Credit Suisse was deficient in managing client relations with the criminal organization and in implementing anti-money laundering rules. It ignored obvious red flags of which it had knowledge— including huge sums of cash being brought in suitcases and two assassinations.
“The company could have prevented the infringement if it had fulfilled its organizational obligations,” the presiding judge said, adding that the former employee’s supervisors had been “passive”.
“This has the potential to be a watershed moment for Switzerland,” said Mark Pieth, a money-laundering expert at the University of Basel. “Credit Suisse is one of the jewels in the Swiss crown.”
Credit Suisse is not the only bank linked to profits from cocaine trafficking. In 2019, a cargo ship belonging to JP Morgan Chase was seized with almost 20 tons of cocaine on board — with an estimated street value of $1.3 billion. U.S. Customs and Border Protection said it was the largest vessel ever seized in the agency’s 230-year history.
The ship, the MSC Gayane, is owned by JP Morgan Asset Management clients through a transportation fund managed by the bank, a source said. JP Morgan leased the ship to Mediterranean Shipping Co., a Switzerland-based shipping company, which was said to be solely responsible for its crew and operations, according to a 2019 CBS News report.
Photo: Gorka Montiel, https://www.flickr.com/photos/gorka_huhezi/