The world’s dirtiest money, welcomed by Credit Suisse. Again.

Dirty_MoneyHere we are again. Credit Suisse, which has sooooo many regulatory issues, just got caught yet into another enormous scandal.

 

160 journalists from 48 different media organizations have simultaneously revealed the results of an investigation of a major leak at Credit Suisse. The leaked information details 18,000 “secret” accounts, belonging to 30,000 clients and representing over $100 billions.

Not all will be found illegal – every individual is allowed to some privacy – but you find in this list the who’s who of non-grata individuals from corrupt dictators to money launderers to killers. Many of those individuals should never have been allowed to have accounts, based on standard KYC procedures and basic moral governance.

 

A few of the account holders

The laundry list includes:

  • Stefan Sederholm, a computer technician who opened his account in 2008. He was actually managing a porn webcam business. He received a life sentence in Philippines for human trafficking in 2011. Credit Suisse didn’t close his account until 2013.
  • Ronald_Li_Fook-shiuRonald Li Fook-shiu, the former Hong Kong Stock Exchange Chairman, was jailed for bribery in 1990. Credit Suisse opened his account in 2000.
  • Rodoljub Radulović had been indicted by the US government for pump-and-dump in 2001, and has been sentenced to another 10 years in jail in Belgrade for cocaine trafficking. He opened an account in 2005 and deposited CHF 3.4 m.
  • Eduard Seidel, an executive for Siemens, was convicted 2008 of setting up a bribery organization in Nigeria. The CHF 54m account was left open “well into the last decade”.
  • Pavlo LazarenkoPavlo Lazarenko, the former prime minister of Ukraine, who resigned after allegations of corruption in 1998. One month later, he opened an account and deposited CHF 8 m. Lazarenko is estimated to have looted his country of $200m. He would eventually plead guilty to money laundering in 2000 in Switzerland and 2006 in the US. He still faces additional accusations in his country.
  • Hosni Mubarak was Egypt’s president until 2011. His sons opened an account in 1993. In 2010, one of the two brothers had a CHF 232 m account. They settled with Egypt and paid $17.6m, without admitting guilt.
  • Hussein Salem, a Mubarak-related tycoon, who died in exile under investigations of money-laundering.
  • Hisham Talaat MoustafaHisham Tallat Moustafa, another Egyptian billionaire related to Mubarak. He ordered the killing of his popstar girlfriend. His 2009 life sentence was eventually commuted to 15 years in prison. His account was not closed until 2014.
  • Omar_SuleimanMubarak’s former spy chief, Omar Suleiman, who oversaw widespread torture and human rights abuses. He had a CHF 63m account in 2007.
  • Khaled Nezzar, an Algerian general who served as defense minister. He participated in a 1993 coup d’état, which started a brutal civil war. His human-rights abuses were well-documented when he opened an account in 2004. The account remained open until 2013, with an average balance of CHF 2m, despite his arrest in 2011 in Switzerland for war crimes.
  • Two dozen accounts to Venezuelan politicians related to corruption scandals at Petroleos de Venezuela. Some were named in litigations, some pleaded guilty… Their bank accounts have dozens of CHF millions, some as late as 2015.

 

More precedents

Credit Suisse was caught with similar bad stories in the past:

  • Sani Abacha, the brutal Nigerian dictator who is presumed to have stolen $5bn from the country in six year regime. Credit Suisse was caught in 1999 with $214m in his sons’ accounts. Switzerland’s Federal Banking Commission reprimanded the bank in 2000.
  • Ferdinand & Imelda MarcosFerdinand and Imelda Marcos, who siphoned $10 bn from the Philippines. Credit Suisse opened multiple accounts for their representatives, or actually for inexistent (fake) individuals (1986). A Zurich court ordered banks, including Credit Suisse to return $500m to Philippines. That didn’t prevent Helen Rivela, a Marcos attorney, to open an account in 2000, despite have been convicted in 1992 for money laundering.
  • Japanese authorities revoked Credit Suisse’s banking license in 1999 for a “shredding party” to present producing evidence related to companies concealing their losses.  A bank spokesperson said: “Serious lessons have been learned, corrective actions initiated and disciplinary steps completed.
  • YazukaA Credit Suisse banker was arrested in 2004 for laundering at least 5 bn Yen for one of the largest Yakuza gang.
  • Birkenfeld blew the whistle on Swiss Banking activities in 2014 and disclosed $ billions of US taxpayers money who had been hidden from the IRS. The country was forced to accept and implement a transparency common reporting standard (CRS), which they started to implement in 2018.
  • The firm pleaded guilty to money-laundering proceedings in the US, leading to enforcement by the US Federal Reserve.
  • It had “significant deficiencies” in its US AML programs in 2016. The lender said it was “taking appropriate internal remedial efforts”.
  • 1MDBSingapore fined Credit Suisse in 2017 for its involvement in the 1MDB corruption scandal. Credit Suisse said it took its money-laundering obligations seriously and was “firmly committed to upholding the high standards of the Singapore financial center”.
  • in 2017, authorities raided its Netherlands and French offices and launched investigations in the UK, Germany and Australia for suspected tax evasion on 55,000 accounts.
  • In 2018, the Swiss regulator fined Credit Suisse for its compliance shortfall with FIFA and PDVSA.
  • That same year, the firm paid $47m in fines to US authorities for offering jobs to family and friends of Chinese officials between 2007 and 2013.
  • LescaudronThe Lescaudron scandal during 2008-2020. The banker forged signatures and caused $150m of losses to his clients, before taking his own life. Credit Suisse said the relationship manager “was not supported by any other employee of the Credit Suisse in his criminal activities”, but the firm had a similar case two years later.
  • Archegos: the firm took a $5.5bn loss in 2021, fired 9 staffs and decided ‘to put risk management “at the heart” of its decision-making‘.
  • GreensillAlso in 2021 was the Greensill scandal. The firm repackaged Greensill loans to clients, before the firm defaulted. The firm had to suspend suspended $10 bn of investor funds. The bank is still trying to claw back money for clients and said “actions have been taken against a number of individuals” in relation to the case.
  • In 2021, Credit Suisse was fined GBP 350 m for the 2012-2016 Mozambique tuna bonds corruption scandal. The bank said it “condemns any unjustified observations and has already taken decisive steps to strengthen its relevant governance and processes”.
  • Tijane ThiamThe January 2022 resignation of Credit Suisse’s chairman after he broke COVID-19 regulations twice. The previous CEO was fired in 2019 for spying on the firm’s employees, but nevertheless requested CHF 30m in past compensation. The firm forgot to disclose the issue to US regulators, and got fined.
  • Credit Suisse is currently in court proceedings for money laundering in Bulgaria. The firm cannot comment on current investigations.
  • Did I forget the Libor-fixing scandal? Credit Suisse was in this one too.

The fines are pilling up. Credit Suisse firm has racked billions in fines or settlement, notably $2.6 bn to US Authorities for tax evasions, $536 m for circumventing US sanctions against Iran and Sudan in 2009 (at which point the firm said that it had “enhanced” its procedures and was “taking action internally”), and other sanctions for tax evasions in Belgium, Germany (in 2011) and Italy (2016). Credit Suisse also paid $5.3 bn for the RMBS issue mentioned above.

 

The implications of these new revelations

With this new scandal, we can certainly ask why Credit Suisse did open, or even maintained, such accounts. The bank has just put a press release asserting the allegations as lies,things of the past” and “concerted efforts to discredit“. It is true that many of the accounts indicated by the press have been closed, but unfortunately, two-thirds of those 18,000 accounts were opened after 2000, and many just in the last decade.

PromisesAlso the firm has constantly repeated that its procedures were improved, and that it should not be punished for errors from the past. It is true that Swiss banks are now forced to verify their clients upon opening and reassess them every 3 years at a minimum. Credit Suisse even stated that it has been doing so since at least 2007. But again, those measures were not very efficient, to say the least, and their ‘past stories’ keeps on repeating at the present tense, again and again.

BankerMore importantly, the number of client accounts, as well as the number of past issues demonstrate a much deeper problem than a few errors. As Jeff Neiman, the Florida attorney defending many Credit Suisse whistleblowers, puts it: “The bank likes to say it’s just rogue bankers. But how many rogue bankers do you need to have, before you start having a rogue bank?” The firm has a deep culture of looking elsewhere. “Its compliance departments [were] masters of plausible deniability.

 

Action?

Swiss banking secrecy laws, notably the article 47 of the 1934 Federal Law on Banks remain in force. They carry a five-year sentence for anybody who divulges private client information. At the very least, there should be a renewed concerted international effort to eliminate Swiss secrecy laws.

Closed_doorIt is also high time that a major bank be terminated and its management jailed if it continuously fails to meet basic compliance standards; the example will set the future path for everybody else.

US authorities can remove any firm’s US banking license. Considering the weight of the United States in international financial markets and in banking, that sanction is a death knell for any large bank, American or foreign.

 

 

 

References

 

 

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.

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