Credit Suisse found guilty in case of money laundering of cocaine

BELLINZONA, Switzerland, June 27 (Reuters) – Credit Suisse (CSGN.S) was sentenced by the Swiss federal criminal court on Monday for failing to prevent money laundering by a Bulgarian cocaine gang in the country’s first criminal trial against one of the country’s major banks. read more

A former employee was found guilty of money laundering in the trial, which included testimony about murder and cash stuffed in suitcases and is seen as a trial case for the prosecuting authorities who take a tougher line against the country’s banks.

The ruling marks another headache for Switzerland’s second largest bank, which has lost billions in losses due to risk management and compliance errors.

Federal prosecutor Alice de Chambrier welcomed the verdict as “good for transparency”.

Both Credit Suisse and the former employee had denied any wrongdoing.

Credit Suisse said they would appeal the verdict. read more

The judges looked at whether Credit Suisse and the former employee did enough to prevent the cocaine gang from laundering profits through the bank from 2004 to 2008. read more

The court said on Monday that it found deficiencies in Credit Suisse both with regard to the handling of the client relationship with the criminal organization and with regard to the monitoring of the implementation of the rules against money laundering.

“These shortcomings enabled the confiscation of the criminal organization’s assets, which were the basis for the conviction of the bank’s former employee for qualified money laundering,” the court said.

“The company could have prevented the breach if it had fulfilled its organizational obligations,” the presiding judge said at the sentencing, adding that the former employee’s superior had been “passive.”

Credit Suisse said the case arose from an investigation dating back more than 14 years.

“Credit Suisse is constantly testing its framework to combat money laundering and has strengthened it over time, in line with evolving regulatory standards,” the bank said.

“Generating compatible business growth in line with legal and regulatory requirements is key for Credit Suisse.”

Credit Suisse was fined 2 million Swiss francs ($ 2.1 million). The court also ordered the confiscation of assets worth more than 12 million francs that the drug gang had in accounts with Credit Suisse, and ordered the bank to give away more than 19 million francs – the amount that could not be confiscated due to internal deficiencies at. Credit Suisse.

The court sentenced the former employee, who cannot be named under Swiss privacy laws, to 20 months probation and a fine for money laundering.

The presiding judge said she had failed to fulfill her role in the bank’s “first line of defense”.

The former banker’s lawyer said she would appeal the “unfounded and unfair decision”, noting that she had not made any financial gain.

“This verdict places the responsibility for money laundering on persons without any serious training or experience,” her lawyer said.

The Credit Suisse stock closed up 0.4%, while the European Banking Index (.SX7P) rose 0.3%. They have fallen more than 40% in the last year.

LEGAL ACTION

Experts in corruption and money laundering had said that the fact that Switzerland had taken legal action against a global banker such as Credit Suisse could send a powerful message in a country known for its banking industry.

“This has the potential to become a watershed for Switzerland,” said Mark Pieth, a money laundering expert at the University of Basel, at the end of the trial.

“What is important about this case is that Switzerland is taking legal action against a company and not just any company – Credit Suisse is one of the jewels in the Swiss crown.”

Swiss private banks have adopted tougher controls against money laundering following international regulatory work to prevent money laundering.

Under Swiss law, a company may be held liable for inadequate organization or failure to take all reasonable steps to prevent a crime from occurring.

In the Credit Suisse case, the prosecution claimed that the former head of relations helped to hide the criminal origins of money for clients through more than 146 million Swiss francs in transactions, including 43 million francs in cash, some of which was stuffed in suitcases. read more

The head of relations, who left Credit Suisse in 2010, was not in the courtroom on Monday.

During court hearings in February, the former head of affairs said that Credit Suisse learned about the murder and cocaine smuggling that was allegedly linked to the Bulgarian gang, but continued to manage cash that became the focus of the trial.

The former banker said during the hearings that she informed her managers about incidents, including two murders, related to the clients, but that they decided to continue the business anyway.

Credit Suisse has denied the illegal origin of the money, saying that a former Bulgarian wrestler and his circle ran legitimate businesses in construction, leasing and hotels.

($ 1 = 0.9594 Swiss francs)

Reporting by Paul Carrel, Additional Reporting by Brenna Hughes Neghaiwi and John O’Donnell; Edited by Michael Shields and Jane Merriman

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