The Financial Conduct Authority has fined Credit Suisse over £147 million for serious financial crime due diligence failings related to loans worth over $1.3 billion, which the bank arranged for the Republic of Mozambique. These loans, and a bond exchange, were tainted by corruption. Credit Suisse has also agreed with the FCA to forgive US$200 million of debt owed by the Republic of Mozambique as a result of these tainted loans.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique. The fine would have been higher if not for Credit Suisse agreeing to provide the debt write-off of US$200 million. The FCA will continue to pursue serious financial crime control failings by regulated firms.’
Between October 2012 to March 2016, Credit Suisse failed to properly manage the risk of financial crime within its emerging markets business. It had sufficient information from which it should have appreciated the unacceptable risk of bribery associated with the two Mozambican loans and a bond exchange related to government sponsored projects.
Credit Suisse was aware Mozambique was a jurisdiction where the risk of corruption of government officials was high and that the projects were not subject to public scrutiny or formal procurement processes. The contractor engaged by Mozambique on the projects was described as a “master of kickbacks”.
The contractor secretly paid significant kickbacks, estimated at over US$50 million, to members of Credit Suisse’s deal team, including two Managing Directors, in order to secure the loans at more favourable terms.
While those Credit Suisse employees took steps to deliberately conceal the kickbacks, warning signs of potential corruption should have been clear to Credit Suisse’s control functions and senior committees. Time and again there was insufficient challenge within Credit Suisse, or scrutiny and inquiry in the face of important risk factors and warnings. The Republic of Mozambique has subsequently claimed that the minimum total of bribes paid in respect of the two loans is around US$137 million.
The FCA fine is part of an approximate US$475 million global resolution agreement announced today involving the US Department of Justice, the US Securities and Exchange Commission, and the Swiss Financial Market Supervisory Authority (FINMA). The FCA would like to thank these agencies for their co-operation.
The FCA took into account Credit Suisse’s undertaking to forgive US$200m of debt owed by the Republic of Mozambique when determining its financial penalty. Credit Suisse also agreed to resolve this case with the FCA, qualifying it for a 30% discount in the overall penalty. Without the debt relief and this discount, the FCA would have imposed a significantly larger financial penalty.
Notes to editors
- FCA Final Notice[1].
- The dollar conversion rate for the financial penalty is correct as of 14 October 2021 and the amount will not change.
- For the purposes of this release and the Final Notice “Credit Suisse” comprises Credit Suisse International, Credit Suisse Securities (Europe) Ltd and Credit Suisse AG.
- As to the action brought by the DOJ, Credit Suisse pleaded guilty to one count of conspiracy to violate the federal wire fraud statute. The SEC’s order against Credit Suisse found that it violated antifraud provisions as well as internal accounting controls and books and records provisions of federal securities laws. Updated 21 October 2021.
- In 2019, one former employee of Credit Suisse pleaded guilty to a charge of conspiring to commit wire fraud, and two others to charges of conspiracy to commit money laundering, such charges having been brought by the DoJ in relation to the matters detailed in the Notice. All three are awaiting sentence.
- FINMA also published the findings of its investigation today. Please refer to the FINMA website for further details.
- FCA Principles for Businesses[2].