{"id":3274,"date":"2021-02-09T02:19:30","date_gmt":"2021-02-09T07:19:30","guid":{"rendered":"https:\/\/navesinkinternational.com\/?p=3274"},"modified":"2023-12-20T02:53:23","modified_gmt":"2023-12-20T07:53:23","slug":"how-to-compound-your-regulatory-problems","status":"publish","type":"post","link":"https:\/\/navesinkinternational.com\/2021\/02\/09\/how-to-compound-your-regulatory-problems\/","title":{"rendered":"How to compound your regulatory problems"},"content":{"rendered":"<p><img fetchpriority=\"high\" decoding=\"async\" class=\"wp-image-3318 alignright size-medium\" src=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/02\/Credit-Suisse-Headquarter-2-300x175.jpg\" alt=\"Credit Suisse headquarters\" width=\"300\" height=\"175\" srcset=\"https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/02\/Credit-Suisse-Headquarter-2-300x175.jpg 300w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/02\/Credit-Suisse-Headquarter-2-768x447.jpg 768w, https:\/\/navesinkinternational.com\/wp-content\/uploads\/2021\/02\/Credit-Suisse-Headquarter-2.jpg 808w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Regulatory reports show that Credit Suisse has failed to investigate one of its private bankers despite many years of warnings. It is unfortunately not an isolated issue.<\/p>\n<p>Any firm has its share of bad apples, but Credit Suisse seems to be compounding legal and compliance issues.<\/p>\n<h3>The Lescaudron scandal<\/h3>\n<p>Here are the main facts of the story:<\/p>\n<ul>\n<li>Mr. Patrick Lescaudron joined Credit Suisse in 2004, with no banking experience but a cluster of relations with Russian-speaking wealthy individuals.<\/li>\n<li>In 2008, he gets a verbal warning for unauthorized transaction.<\/li>\n<li>In 2011, after a reorganization at the firm, systems flag undocumented trades between clients of Mr. Lescaudron, notably in Raptor shares, which sparked a probe.<\/li>\n<li>In 2012, the fraud prevention unit escalate the issue. The following year, Mr. Lescaudron receives a written warning for entering implausible client information in the firm&#8217;s systems.<\/li>\n<li>In 2014, Mr. Lescaudron&#8217; s clients now own more than 10% of Raptor&#8217;s outstanding issue, preventing any further purchase. Mr. Lescaudron is promoted.<\/li>\n<li>In 2015, further shares are purchased, despite the ban. That year, the stock price plunges on bad news. His frauds are discovered and he is fired. Two more individuals are fired after an internal investigation. A\u00a0report is commissioned by\u00a0FINMA, the Swiss regulator. It found hundreds of alerts during the 2009-2015 period. They were known to the bank, but not investigated by, since at least 2011.<\/li>\n<li>In 2017, Mr. Lescaudron is charged by Geneva prosecutors.<\/li>\n<li>In 2018, Patrick Lescaudron, who had admitted to <a href=\"https:\/\/www.afr.com\/companies\/financial-services\/credit-suisse-banker-prepared-fake-excel-spreadsheets-to-mask-mounting-losses-20180119-h0kp1q\" target=\"_blank\" rel=\"noopener noreferrer\">creating fake excels<\/a> and to copy-pasting client signatures to divert money, is <a href=\"https:\/\/www.reuters.com\/article\/credit-suisse-gp-crime-idUSKBN1FT1U0\" target=\"_blank\" rel=\"noopener noreferrer\">sentenced to five years in prison<\/a> for fraud and forgery. He had amassed a personal fortune of CHF 32 million (with the usual houses, Ferraris, paintings, Rolex&#8230;), but was ordered to repay $130m.\u00a0FINMA publicly censures Credit Suisse for lack of supervision and lack of action.<\/li>\n<li>In 2019, Mr. Lescaudron kills himself.<\/li>\n<li>In 2020, Credit Suisse lost its bid to prevent the 2018 FINMA report to be disclosed to the Swiss authorities.<\/li>\n<\/ul>\n<p>The case naturally begs the question of why were warnings not investigated for so long.<\/p>\n<h3>Other contributing elements:<\/h3>\n<ul>\n<li>The private banker generated $150 m of losses in his investment bets. It is likely that his frauds could have been ongoing if it was not for the large Rapstor loss.<\/li>\n<li>A risk analyst was scared to lose his job if he was escalating the issues further.<\/li>\n<li>A group of investors, notably the former prime minister of Georgia, Bidzina Ivanishvili,\u00a0is <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-07-23\/credit-suisse-faces-new-lawsuit-in-singapore-over-rogue-trader\" target=\"_blank\" rel=\"noopener noreferrer\">suing CS for $800m<\/a>. Credit Suisse denies any wrongdoing.<\/li>\n<li>Credit Suisse says that &#8220;it has improved its systems and procedures&#8221;, etc.<\/li>\n<\/ul>\n<h3>Legal woes<\/h3>\n<p>Now, Credit Suisse has a laundry list of legal issues these last few years:<\/p>\n<ul>\n<li>Credit Suisse had <a href=\"https:\/\/www.fa-mag.com\/news\/credit-suisse-uncovers-client-fraud-at-wealth-management-57729.html\" target=\"_blank\" rel=\"noopener\">a\u00a0similar case two years after Mr. Lescaudron<\/a>.<\/li>\n<li>Credit Suisse has a history of problem in its private banking activities, notably <a href=\"https:\/\/money.cnn.com\/2014\/05\/19\/news\/companies\/credit-suisse\/\" target=\"_blank\" rel=\"noopener noreferrer\">US tax evasion<\/a>, but also <a href=\"https:\/\/finance.yahoo.com\/news\/credit-suisse-cs-under-belgium-142802684.html\" target=\"_blank\" rel=\"noopener noreferrer\">Belgian tax evasion<\/a>.<\/li>\n<li>Credit Suisse is being <a href=\"https:\/\/securitiesarbitration.com\/news\/credit-suisse-shed-u-s-private-bank-with-eye-on-reviving-it\/\" target=\"_blank\" rel=\"noopener noreferrer\">sued by many US private bankers for reneging on payment compensation agreements<\/a>, and causing them\u00a0legal troubles when they leave.<\/li>\n<li>Credit Suisse is also involved in a variety of other trading issues, like <a href=\"https:\/\/www.finews.asia\/finance\/31582-credit-suisse-corporate-bonds-class-action-rmbs-jersey-asia-china\" target=\"_blank\" rel=\"noopener noreferrer\">over-charging for bond odd-lots<\/a>, the <a href=\"https:\/\/www.finews.com\/news\/english-news\/28499-libor-cs-ubs-face-more-claims-in-the-u-s\" target=\"_blank\" rel=\"noopener noreferrer\">LIBOR scandal<\/a>, or the sale of <a href=\"https:\/\/www.justice.gov\/opa\/pr\/credit-suisse-agrees-pay-528-billion-connection-its-sale-residential-mortgage-backed\" target=\"_blank\" rel=\"noopener noreferrer\">Mortgage-Backed Securities<\/a>.<\/li>\n<li>Credit Suisse is also known for having <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-09-06\/credit-suisse-may-have-spied-on-more-staff-swiss-newspaper-says\" target=\"_blank\" rel=\"noopener noreferrer\">spied on its employees<\/a>\u00a0(with claims of whistleblower retaliation), involving <a href=\"https:\/\/www.theguardian.com\/business\/2019\/oct\/01\/credit-suisse-spying-scandal-investigation\" target=\"_blank\" rel=\"noopener noreferrer\">the most senior management of the firm<\/a> and caused the <a href=\"https:\/\/www.theguardian.com\/business\/2020\/feb\/07\/credit-suisse-chief-tidjane-thiam-ousted-after-spying-scandal\" target=\"_blank\" rel=\"noopener noreferrer\">ouster of its CEO,\u00a0Tidjane Thiam<\/a>. He nevertheless <a href=\"https:\/\/www.reuters.com\/article\/us-credit-suisse-gp-pay\/ousted-credit-suisse-ceo-thiam-to-collect-up-to-30-million-sources-idUSKBN2071SJ\" target=\"_blank\" rel=\"noopener noreferrer\">claimed CHF 30 m in compensation<\/a>, or 2.5x his compensation for his previous 1-year-tenure.<\/li>\n<li><a href=\"https:\/\/news.bloomberglaw.com\/privacy-and-data-security\/credit-suisse-must-hand-over-video-in-case-linked-to-spy-claims\" target=\"_blank\" rel=\"noopener noreferrer\">Credit Suisse failed to disclose the spying information to US authorities<\/a>, arguing of business confidentiality needs.<\/li>\n<li>Credit Suisse has <a href=\"https:\/\/www.americanbanker.com\/news\/credit-suisse-flagged-for-anti-money-laundering-shortcomings\" target=\"_blank\" rel=\"noopener noreferrer\">money-laundering issues<\/a> in the US, which led to <a href=\"https:\/\/www.federalreserve.gov\/newsevents\/pressreleases\/files\/enf20201222a1.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">enforcement action from the Federal Reserve<\/a>.<\/li>\n<\/ul>\n<p>Here is my modest grain of salt. If you want to avoid always larger <a href=\"https:\/\/www.cnbc.com\/2021\/01\/08\/credit-suisse-forecasts-fourth-quarter-loss-on-provisions-from-us-case.html\" target=\"_blank\" rel=\"noopener noreferrer\">provisions<\/a> and <a href=\"https:\/\/www.reuters.com\/article\/us-creditsuisse-results-outlook\/credit-suisse-to-slide-into-red-as-it-sets-aside-850-million-for-u-s-litigation-idUSKBN29D0MG\" target=\"_blank\" rel=\"noopener noreferrer\">profit warnings<\/a>, maybe you could avoid those legal issues in the first place? Maybe change the corporate culture? Just say&#8217;n.<\/p>\n<p>&nbsp;<\/p>\n<h4><span style=\"text-decoration: underline;\">Credits<\/span><\/h4>\n<p>Credits to <a href=\"https:\/\/www.linkedin.com\/in\/margot-patrick-9631621\/\" target=\"_blank\" rel=\"noopener noreferrer\">Margot Patrick<\/a> at <a href=\"https:\/\/www.wsj.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">The Wall Street Journal.<\/a><\/p>\n<p><iframe style=\"background: white;\" src=\"https:\/\/www.wsj.com\/articles\/credit-suisse-was-alerted-to-private-bankers-misconduct-years-before-criminal-charges-11612462705?reflink=desktopwebshare_linkedin\" width=\"100%\" height=\"650\"><\/iframe><\/p>\n","protected":false},"excerpt":{"rendered":"<p>One of Credit Suisse&#8217;s top bankers was up to no good. The firm was warned and did nothing.<br \/>\nThis new scandal is unfortunately far from being the first for the Swiss bank. Regulatory investigations (and provisions!) are actually pilling up.<\/p>\n<p>This article explains the last scandal, in the context of the firm&#8217;s recent compliance woes.<\/p>\n","protected":false},"author":1,"featured_media":3318,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[12,13],"tags":[62,65,35,20,46,66],"acf":[],"_links":{"self":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/3274"}],"collection":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/comments?post=3274"}],"version-history":[{"count":2,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/3274\/revisions"}],"predecessor-version":[{"id":13191,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/posts\/3274\/revisions\/13191"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media\/3318"}],"wp:attachment":[{"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/media?parent=3274"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/categories?post=3274"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/navesinkinternational.com\/wp-json\/wp\/v2\/tags?post=3274"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}