A Swiss court has fined Credit Suisse for helping a Bulgarian drug syndicate launder money. The ruling comes at an unfortunate time for the struggling bank, which had recently grappled with losses and management issues.
The bank has indicated it will file an appeal.
The Federal Criminal Court of Switzerland ordered Credit Suisse to pay fines and compensation amounting to 21 million Swiss francs (USD 22million) for demonstrating lax policies that facilitated an employee to aid a Bulgarian drug ring’s laundering activities.
Another bump in the road for Credit Suisse
This courtroom loss adds to a growing list of woes for the Swiss bank, which had already issued a profit warning and is currently struggling with conflicts in the boardroom.
The Zurich-based bank nevertheless said it would appeal the decision that resulted from a bank employee’s actions dating back to 2007 and 2008. The unnamed employee aided the drug syndicate in realizing bank transfers without regard for the “money’s criminal origins” despite evidence countering their legitimacy.
The same employee testified was aware that the bank received money from cash-stuffed suitcases whose origin was determined to be a Bulgarian gang involved with large-scale cocaine smuggling and murders in South America.
In the court’s ruling, Credit Suisse acknowledged its share of responsibility since bank management, its compliance department, and its legal team failed to enforce anti-money laundering protocols strictly. The bank said that its anti-money-laundering framework is continuously being tested and strengthened.
The Swiss court ordered Credit Suisse to pay fines amounting to 2 million Swiss francs and seized the drug ring’s 12 million francs held by the bank. It also ordered the bank to pay 19 million francs in addition to its money laundering violation fine to pay for unrecoverable funds due to its “internal deficiencies.”
Meanwhile, the employee was handed a 20-month prison sentence. Two Bulgarian citizens were also sentenced to prison, one for 36 months for setting the money laundering activity up and the second for 12 months for acting as the middle man.
Investors warned of losses
The bank still reels from billion-dollar losses from bankrupt Greensill Capital and hedge fund Archegos. Its chairman António Horta-Osório resigned in January, after less than a year after facing criticism of his protocol-breaking travels during the pandemic. Three months later, its general counsel, finance chief, and head of Asia also parted ways with the bank.
Credit Suisse has warned its investors about expected losses for the quarter. This is the third warning it issued due to slow economic growth.