Credit Suisse found guilty of “being unable to prevent” money laundering by drug ring

06/30/2022 / By Mary Villareal

The Federal Criminal Court of Switzerland (FCC) found a former employee of Credit Suisse, alongside the bank itself, guilty of being unable to prevent money laundering done by a drug ring involving Bulgarian cocaine traffickers.

Magistrates gave the former Credit Suisse manager, who prosecutors accused of accepting suitcases of cash from one of the syndicate’s members, a 20-month suspended sentence. Two members of the drug ring and another employee from a different bank were also found guilty of money laundering.

Credit Suisse itself was not off the hook, as the FCC also fined the bank two million Swiss francs ($2.1 million) over “certain historical organizational inadequacies.” The crime pertained to amounts of money the cocaine traffickers spent on prostitutes during a trip to Switzerland, which were deposited in the bank. (Related: Both Citigroup and JPMorgan have now received huge fines for crimes the regulators won’t reveal.)

According to the Swiss court, Credit Suisse made it possible for the crime ring to launder money through the bank between July 2007 and December 2008 by failing to adequately monitor its accounts and making sure that the business complied with anti-money-laundering rules. The crime ring also allegedly recruited a Bulgarian wrestler and others in its circle for operations.

Both the former manager and the bank itself denied the accusations. Credit Suisse said in a pre-trial statement that “it unreservedly rejects as meritless all allegations in this legacy matter raised against it and is convinced that its former employee is innocent.”

The bank reiterated that its organizational setup was “correct and appropriate” in the period being probed, citing a review on its money laundering systems conducted by outside lawyers and consultants. It also argued that the crimes date back to an era when compliance standards were less stringent.

The verdict is considered by many as the most significant criminal conviction of a major Swiss Bank in the country’s history.

Authorities taking legal action against major banks

This decision is another blow to the already tarnished reputation of Credit Suisse. The bank is set to face a second indictment in an unrelated case later this year. To make matters worse, it has also struggled with a series of scandals that have sent its shares to near-record lows.

Credit Suisse criticized the case for having been brought up so many years after the events in question. The bank questioned why Swiss prosecutors publicly charged it with money laundering offenses in late 2020, even though the alleged crimes took place between 2004 and 2008.

Corruption and money laundering experts said Switzerland taking legal action against a major bank like Credit Suisse could send a powerful message in a country that is famous for its banking industry.

Mark Pieth, a money-laundering expert at the University of Basel, said on the eve of the trial that it has the potential to be a watershed moment. The fact that Switzerland is taking action against Credit Suisse – considered as “one of the jewels in the Swiss crown” – is especially significant, he added.

Swiss private banks have adopted tougher anti-money laundering checks after an international regulatory crackdown to prevent money laundering. However, Switzerland itself still has massive gaps in its prevention.

Credit Suisse said it would appeal against the conviction.

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