Credit Suisse Conviction Signals New Money Laundering Liabilities for Banks

A courtroom verdict in  Switzerland is signaling that banks will be under increasing scrutiny for the acts they take and have taken, to combat fraud — stretching back over decades.

The liabilities, and possible penalties, will be significant.

To that end, as reported Monday (June 27), Credit Suisse Group AG was convicted in Switzerland’s federal criminal court of failing to prevent money laundering.

As for the specifics of that case, the bank had been on trial over allegations that Credit Suisse and the former employee did not take appropriate action to stop a Bulgarian drug trafficking outfit from laundering profits through the bank.

Read more: Credit Suisse’s Swiss AML Case Reminds Us That Fraud Is Old School

Credit Suisse was fined the equivalent of $2 million. And, as also was reported Monday, the bank intends to appeal the verdict.

And while we contend that the fine itself is but a drop in the bucket for a company that has hundreds of billions of dollars of cash on hand, the ripple effects will extend beyond Credit Suisse.

That’s because the company’s actions, in that case, date back to 2004 to 2008.  The criminal charges in part lie with an inadequate screening of cash deposits — where as Bloomberg noted, those deposits had been regularly accepted by the aforementioned unnamed banker in amounts exceeding $500,000.

Some observers might charge that the verdict applies today’s anti-fraud standards to yesterday’s “standard operating procedures” — a mismatch of sorts that can ultimately be punitive. Indeed, Credit Suisse has said it is “continuously testing its anti-money laundering framework and has been strengthening it over time, in accordance with evolving regulatory standards.”

Ripple Effects 

Regardless of the fine and the appeal, and the ultimate outcome of that appeal, we can assume that the regulatory gaze will only tighten, certainly in Switzerland, and elsewhere, too.

As reported earlier this month, the U.K. Financial Conduct Authority has put Credit Suisse on a watchlist of companies needing tougher supervision.

And here in the United States, new anti-money laundering reform looms, potentially, through the Enablers Act. That legislation would amend the Bank Secrecy Act by requiring trust companies, lawyers, art dealers, financial advisers and real estate agents to investigate clients and their sources of funds coming into the U.S. financial system.  Middlemen in foreign transactions would be subject to greater scrutiny.

Read Also: Congress Closer to Passing Major Money Laundering Rule

In an interview with PYMNTS’ Karen Webster earlier in 2022, Annegret Funke, head of Financial Crime at Featurespace,  said banks face challenges because AML and know your customer (KYC) efforts at banks tend to be siloed.  Banks can do much to short-circuit money laundering schemes by focusing on the source of funds, linking customers to an “overlay” of several layers of controls.  Different departments within the bank have the independence to raise AML concerns, beyond simply “ticking boxes” that are related to their internal processes, she told Webster, in a holistic approach to fighting fraud.