Swiss Bank 'Credit Suisse' Hit with Historic Money Laundering Conviction Related to Cocaine Trafficking

"Socalj" for Borderland Beat

Convictions were handed down in the first criminal trial of a major bank in Switzerland against Credit Suisse.

Credit Suisse was convicted by Switzerland's Federal Criminal Court on Monday of failing to prevent money laundering by a Bulgarian cocaine trafficking gang in the country's first criminal trial of one of its major banks.

A former employee was found guilty of money laundering in the trial, which included testimony on murders and cash stuffed into suitcases and is seen as a test case for prosecutors taking a tougher line against the country's banks.

The ruling marks another headache for Switzerland's second-biggest bank, which has been reeling from billions in losses racked up via risk-management and compliance blunders. Federal prosecutor Alice de Chambrier welcomed the verdict as "good for transparency". Both Credit Suisse and the former employee had denied wrongdoing. Credit Suisse said it would appeal against the conviction. read more

The judges looked at whether Credit Suisse and the former employee did enough to prevent the cocaine trafficking gang from laundering profits through the bank from 2004 to 2008. The court said on Monday it found deficiencies within Credit Suisse both with regard to the management of client relations with the criminal organization and with regard to the monitoring of the implementation of anti-money laundering rules.

"These deficiencies enabled the withdrawal of the criminal organization's assets, which was the basis for the conviction of the bank's former employee for qualified money laundering," the court said. "The company could have prevented the infringement if it had fulfilled its organizational obligations," the presiding judge said in handing down the verdict, adding that the former employee's superiors had been "passive". Credit Suisse said the case arose from an investigation that dated back more than 14 years. "Credit Suisse is continuously testing its anti-money laundering framework and has been strengthening it over time, in accordance with evolving regulatory standards," the bank said.

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 held in accounts at Credit Suisse, and ordered the bank to relinquish more than 19 million francs -- the amount that could not be confiscated due to internal deficiencies at Credit Suisse. ($1 = 0.9594 Swiss francs)

The court handed the former employee, who cannot be named under Swiss privacy laws, a suspended 20-month prison sentence 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 attorney said she would appeal against the "unfounded and unfair decision", noting she had not made any financial gain. "This judgment places the responsibility for money laundering on people without any serious training or experience," her attorney said. Credit Suisse shares closed up 0.4%, while the European banking sector index (.SX7P) rose 0.3%. They are down more than 40% in the past year, having faced several scandals and loan defaults in the last few years.

Credit Suisse is Switzerland's second-largest bank.

Bulgarian Cocaine Trafficking Gang

Credit Suisse and one of its former employees faced charges of allowing an alleged Bulgarian cocaine trafficking gang to launder millions of Euros, some of it in used banknotes stuffed into suitcases. Credit Suisse learned of murders and cocaine smuggling allegedly connected to a Bulgarian gang but continued to manage cash, a banker convicted of money laundering told a Swiss court during the case. 

The bank and the accused banker denied any wrongdoing. The indictment centered on relationships that Credit Suisse and its ex-employee had with former Bulgarian wrestler Evelin Banev and multiple associates, two of whom were also charged in the case.

The female banker, who is accused of helping conceal the criminal origins of the money through more than 146 million Swiss francs in transactions, appeared in the Federal Criminal Court in Bellinzona in southern Switzerland along with her managers who gave evidence. The events unfolded between 2004 and 2008.

A Credit Suisse spokesperson said the bank has rejected all allegations and that it was convinced its former employee was innocent. Credit Suisse disputes the illegal origin of the money, a source familiar with its thinking has told Reuters, saying that Banev and his circle operated legitimate businesses in construction, leasing, and hotels.

Banev is not facing charges in Switzerland but was convicted in Italy of drug trafficking in 2017 and in Bulgaria in 2018 for money laundering. He was arrested in September in Ukraine as countries including Bulgaria and Romania sought his arrest. In Sofia, his attorney said last week that Banev denied any involvement in laundering money from drug trafficking through Credit Suisse.

Bank Management Allegedly Learned of Murders Early On

The former Credit Suisse banker whose identity cannot be reported under Swiss privacy rules said she told her managers of events, including two murders, but that they decided to pursue the business nonetheless.

In an email from June 2005 read out in court, a Credit Suisse banker played down press reports linking the murder of one of Banev's associates a month earlier with drug trafficking. "After the homicide, we have decided to continue the business relationships," the banker wrote in the email. "The said (short and imprecise) article linking the murder to Spanish cocaine...has not been confirmed."

Roughly two years later, the victim's mother was also murdered shortly before she was due to give a statement as part of an investigation into Banev, the female banker later told the court, prompting her to raise the matter with her managers.

Banev, whose lawyer declined to comment further on Thursday, was in custody at the time, charged with participating in an organized crime group that aimed to launder money.

"The reaction I received when talking with my hierarchy, the questions were: was the person killed a bank client? No, she was not," the banker told the court. "Is she in any way linked to the bank, do you know her?" she said, recalling the conversation. "I said: 'No, never met her'. And then the reaction was, well then what is your problem?"

The court heard that the banker received bonuses of 122,000 Swiss francs in 2006 and 180,000 francs in both 2007 and 2008.

Taking the stand to give evidence, the banker's managers said this week they could recall little of events at the time and said they had trusted the matter to the bank's legal and compliance department in line with internal rules regarding funds under investigation.

"The whole process is with legal and compliance," one of the banker's former managers told the court. "The relationship manager is asked not to inform colleagues when legal and compliance considers it important to inform different hierarchy, then they do it."

Switzerland's second-biggest bank, when asked for comment, reiterated that it rejected all the allegations as meritless and said there was no wrongdoing by its former employee. The case was being followed closely in Switzerland, where it is seen as a test for prosecutors to take a potentially tougher line against the country's banks.

Corruption and money laundering experts said the fact that Switzerland had taken legal action against a global banking player like Credit Suisse could send a powerful message in a country famous for its banking industry.

Sources Reuters, Reuters, Reuters