Credit Suisse Under Scrutiny Over Culture After Client Data Leaks

Credit Suisse faces fresh scrutiny from Swiss regulators and the European Parliament after leaked data purported to reveal the bank had served human rights abusers, corrupt politicians, and businessmen under sanctions for decades.

Credit Suisse is under fire

The Swiss bank denied any wrongdoing and stated it “strongly rejects” the allegations published by dozens of international media outlets accompanying a coordinated investigation. The leak of client data was first sent to a German paper prior to being picked up by the Organized Crime and Corruption Reporting Project and 46 other news organizations.

Credit Suisse claimed the occurring record, entitled “Suisse Secrets,” outlined “predominantly historical” matters and was based upon “partial, inaccurate, or selective information taken out of context, causing tendentious interpretations of the bank’s business conduct.”

” Approximately 90% of the examined accounts are today shut or were in the process of closure prior to receipt of the press queries, of which over 60% were closed prior to 2015.

Swiss regulator FINMA said it knew the articles, though it could not comment on individual media reports.

” We can verify that we are in contact with the bank in this context. Compliance with money laundering regulations has actually been a focus of our supervisory activities for several years now. We refer to FINMA’s measures and also procedures in the context of combating money laundering recently,” FINMA included.

Meanwhile, the European People’s Party (EPP)– the conservative grouping commanding the biggest number of seats in the European Parliament– on Monday urged the European Commission to “re-evaluate Switzerland as a high-risk money-laundering country,” implying it could be included on the EU’s blacklist for countries well-known for laundering dirty money.

” The ‘Swiss Secrets’ discoveries point to enormous shortcomings of Swiss banks when it pertains to the prevention of money laundering,” said Markus Ferber, the EPPs coordinator on economic affairs.

” When Swiss banks fail to abide international anti-money laundering standards appropriately, Switzerland itself turns into a high-risk jurisdiction.”

New discoveries

In its latest earnings report and in the aftermath of the resignation of its former chairman Antonio Horta-Osorio– which was discovered to have violated Covid-19 quarantine rules on several occasions– Switzerland’s second-largest bank had stressed focus on overhauling its corporate culture.

The bank was burned severely by litigation expenses in the 4th quarter of 2021 while the fallout continued over its involvement with fallen U.S. hedge fund Archegos Capital and insolvent supply chain finance company Greensill.

This resulted in Credit Suisse reserving “major litigation provisions of 1.1 billion Swiss francs ($ 1.2 billion) and posting a full-year net loss of 1.57 billion Swiss francs for 2021.

Credit Suisse also just recently became the first Swiss bank to respond to criminal charges and faces a court case featuring millions of euros in alleged money laundering for drug gangs between 2004 and 2008.

Last week, a banker accused of money laundering told the court that Credit Suisse discovered murders and cocaine trafficking allegedly connected to a Bulgarian mafia organization, yet proceeded to handle the cash in question. The banker and Credit Suisse deny any kind of wrongdoing.

In October 2021, FINMA finished an investigation into a number of legacy anti-money laundering problems dating back decades before 2014 and some between 2016 and 2019. The regulator enforced measures on the team and remained to track their implementation.

Scandals have plagued Credit Suisse for several years. Former CEO Tidjane Thiam resigned in early 2020 after a strange spying saga that caused a contractor’s death and the ousting of its COO, Pierre-Olivier Bouee.

Horta-Osorio was called in to right the ship regarding corporate culture, just to be compelled to step down himself. Following the bank’s latest earnings report, CEO Thomas Gottstein informed CNBC that righting risk management and controls was a top priority after a “challenging year.”

‘ Extremely weak risk management

Credit Suisse stock is currently down more than 9.5% year-to-date and trades at a discount contrasted to its peers, at around 0.47% of the sector average in Europe.

DBRS Morningstar, which covers Credit Suisse stock, informed CNBC on Monday that the latest news “highlights additional risk management shortcomings at Credit Suisse, including anti-money laundering procedures and absence of internal controls as well as management accountability.”

” We believe the news adds to the significant failures observed in 2021 and point to extremely weak risk management and regulates at the Group degree as well as throughout the various organizations, to now consist of Wealth Management, after the Archegos problem in the Investment bank as well as the Supply Fund Chains issue in Asset Management,” Maria Rivas, senior vice president of financial institutions at DBRS Morningstar, told CNBC.

” This is an additional hit for CSG and also the brand-new chairman as well as management team, attempting to make a clean start. They also announced a 2022 transition year to rebuild confidence and improve risk management.”

Rivas proposed that despite new leadership’s focus on overhauling the bank’s risk culture and controls, these modifications can “take years to appear” given the complexity and scale of the team’s international structure.

“Also, there could be the additional implication for CSG if this is taken into consideration a violation of Swiss banking secrecy under the Swiss Banking Act article 47, as it is a federal crime to divulge the information or activity of clients banking domestically to international entities,” she included.

Read the original article on CNBC.

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