Credit Suisse is at the center of a worldwide journalistic investigation. What’s inside Credit Suisse secret and lies?
HSBC: A different point of view is simply the view from a place where you’re not. The “different point of view” appears to have meant dirty money for a bank that was later indicted and penalized for being a party to money laundering, and the “place where you’re not” appears to have meant the Sinaloa cartel.
HSBC wasn’t the first bank to be accused of laundering illegal funds, and it certainly will not be the last, as evidenced by recent events involving Credit Suisse. A massive data leak exposed how the financial institution had ties to account holders implicated in torture, money laundering, drug trafficking, corruption, and a variety of other crimes.
The whistleblower revelations have sparked outrage among European regulators and threaten to harm Switzerland’s financial sector. Some members of the EU Parliament are now seriously considering adding the country to a “money-laundering blacklist.”
Let’s get into the nitty-gritty of the issue.
What are the “Suisse Secrets”?
It is a worldwide journalistic investigation into a Credit Suisse data leak. The details of more than 18,000 bank accounts (out of the bank’s total of 1.5 million) were leaked by a whistleblower to the Munich-based Süddeutsche Zeitung.
The data was investigated as part of a project co-ordinated by the newspaper, the Organised Crime and Corruption Reporting Project (OCCRP), and 48 media partners from around the world, including journalists from The New York Times, The Guardian, Le Monde, Miami Herald, NDR, and others.
So far, we know only that the whistleblower believes that “Swiss banking laws are immoral.”
The following are the key details from the leaked data that caught everyone’s attention:
- There are nearly 200 accounts in the data that are worth more than 100 million Swiss Francs (CHF) ($100 million). Several are worth billions of dollars.
- Many prominent entities have accounts, including Jordan’s King Abdullah II, Egyptian dictator Hosni Mubarak’s sons, Pakistani intelligence chiefs, Yemeni spy officials implicated in torture, Venezuelan officials involved in corruption, a Serbian drug lord, and others.
- Funding Mujahideen fighters in Afghanistan, accounts of oil smugglers accused of torture, bribing Venezuelan government officials, and so on were all funneled through the bank.
Given the cross-country and cross-media cooperation that went into investigating its details, the leak has a Panama/Pandora/Paradise vibe to it.
But there are a few things that set it apart from the crowd. One, the data released does not reveal any current bank operations, only details of accounts opened from the 1940s until late in the last decade. Two, the information contains clients from more than 120 jurisdictions, but some of the world’s largest countries – the United States, Russia, China, India, and Brazil – are underrepresented.
Thus, its revelations are shocking enough to put Credit Suisse on the defensive.
The Suisse Scandal
Over the last few years, the 160-year-old Credit Suisse machinery has developed a number of flaws. To begin with, the bank lost nearly $10 billion as a result of two scandals: 1) the collapse of the British financier Greensill Capital and 2) the default of the US-based hedge fund Archegos.
But, for the time being, let’s ignore the mistakes in business operations and profit-making and concentrate on the ethical side of things. Even here, Credit Suisse has been embroiled in a series of scandals and has been accused of fostering a culture of “maximum risk-taking.”
It all started in the year 2000, when Nigerian dictator Sani Abacha and his family used the bank to steal $200 million. Credit Suisse had promised that it would accept “only those clients whose source of wealth and funds can be reasonably established to be legitimate” after facing significant fines from the Swiss Banking Association.
History suggests that this is not the case.
Regulatory Violations at Credit Suisse
- Credit Suisse pleaded guilty in 2014 to assisting in the filing of false tax returns in the United States. Fines, penalties, and restitution totaling $2.6 billion were agreed upon.
- Credit Suisse paid $5.3 billion to the US Department of Justice in 2017 to settle allegations about its mortgage-backed securities marketing.
- Credit Suisse agreed to pay the US and UK authorities $475 million in 2021 to settle an investigation about a kickback and bribery scheme in Mozambique.
- Credit Suisse is charged of facilitating money laundering for drug traffickers, and a trial began in Switzerland in 2022.
Widespread due diligence failures have become the norm for the bank, which is one of the world’s largest private lenders, employs over 50,000 people, serves 1.5 million clients, and manages substantial assets $1.6 trillion. Repeated promises to improve have been rendered worthless as the bank evidently continues to harbor illicit funds from dubious clients.
Worse yet, Credit Suisse was not the only one to blame. As quickly as cheese is exported out of Switzerland, dirty money flows in. Years of strict banking secrecy laws have turned the country as the most attractive location for those seeking to hide their assets. The Suisse Secrets are more of an authentication than a secret.
It doesn’t end there, though. Banks and financial service firms all over the world continue to work with shady clients who enrich themselves in countries with weak legal systems and oversight. Decades of vigilance and regulatory crackdowns haven’t been enough to stop banks from interfering in financial crimes. If only Pfizer could develop a vaccine quickly enough.
Taking a Closer Look Inside the Credit Suisse Secret and Lies
Opening bank accounts is not prohibited for high-risk and politically influential individuals. However, the source of wealth in their accounts must be investigated. Credit Suisse, for example, chooses to ignore the need for such scrutiny by prioritizing the outweighed income from those accounts over due diligence.
It’s a different story for people who have been convicted of corruption, are on sanction lists, or have outstanding Interpol notices against them. In those cases, the risk of money laundering is so high that the bank must make it a policy not to open accounts in the first place.
Another question to consider is how much responsibility should a bank the size of Credit Suisse take on when acquiring clients through mergers. For example, in March 2013, the bank acquired $13 billion in assets from Morgan Stanley that belonged to high-net-worth individuals. Is the acquirer solely responsible for conducting due diligence?
Yes, indeed. The billing hours put into long drawn-out exercises like due-diligence are one of the reasons why M&A departments of law firms and investment banks make a fortune. Every financial regulatory rulebook in the world emphasizes the importance of banking practices aimed at preventing money laundering (AML), terror financing (CFT), and other forms of financial crime.
Despite this, reports about banking scandals appear in the media from time to time – The Suisse Secrets, NatWest gold dealings, The FinCEN Files, Danske Bank, Swedbank scandal, and so on.
Concerning the Blacklisting of Switzerland
For the time being, the prospect has gained traction, but it’s difficult to say how long it will continue to gain traction. The List was compiled by 28 EU Finance Ministers in the wake of the Panama Papers and LuxLeaks in order to increase tax evasion enforcement.
But, in essence, it’s little more than a “naming and shaming” exercise for the offending countries, with bare-bones sanctions and a temporary suspension of EU funding.
Another question to consider is how much responsibility should a bank the size of Credit Suisse take on when acquiring clients through mergers. For example, in March 2013, the bank acquired $13 billion in assets from Morgan Stanley that belonged to high-net-worth individuals. Is the acquirer solely responsible for conducting due diligence?
Yes, indeed. The billing hours put into long drawn-out exercises like due-diligence are one of the reasons why M&A departments of law firms and investment banks make a fortune. Every financial regulatory rulebook in the world emphasizes the importance of banking practices aimed at preventing money laundering (AML), terror financing (CFT), and other forms of financial crime.
