Watchdog faults Swiss bank Julius Baer for money laundering lapses
Swiss bank Julius Baer (BAER.S) has been reprimanded by the
country’s financial watchdog for ignoring money laundering risks in handling
millions of francs of payments linked to corruption in Venezuela and world
soccer body FIFA.
In a highly critical report, FINMA said there had been
scores of failings at Switzerland’s third-largest listed bank, such as its
acceptance of a 70 million Swiss franc ($71 million) transfer for a Venezuelan
customer in 2014 despite knowing he was accused of corruption.
The regulator’s announcement, which outlined serious lapses
as recently as 2018, comes as Switzerland seeks to change its image as one of
the world’s most opaque and secretive financial centers.
Under pressure from tax authorities abroad, the Alpine
nation pared back banking secrecy, though some experts say its concessions
apply to rich countries rather than poor ones and recent scandals show money
laundering remains a major risk.
FINMA told Julius Baer to improve its controls and appointed
an auditor to oversee the group. Nonetheless, it did not make use of its power
to demand the return of profits linked to wrongdoing, meaning the bank faces no
financial penalty.
In a similar case in 2016, FINMA confiscated 95 million
Swiss francs from Swiss bank BSI only to have its decision overruled by a Swiss
court in December.
The watchdog on Thursday said it had uncovered systematic
failings and management inaction on money-laundering risks, with the vast
majority of the 150-plus sample transactions it had examined showing
irregularities between 2009 and early 2018.
Julius Baer acknowledged the lapses.
“We accept FINMA’s findings and regret the shortcomings
identified in our business with Latin American clients,” said Chairman Romeo
Lacher. “This is not compatible with the risk culture that we are striving to
achieve.”
The bank’s shares were down 1.9% by 1448 GMT.
BRIBERY SCANDAL
The failings were connected to cases of corruption linked to
Venezuelan oil company PDVSA and global soccer governing body FIFA, the
regulator said.
FIFA has been embroiled in a bribery scandal that led to
former president Joseph Blatter and former vice-president Michel Platini being
banned from soccer in 2015 over illicit payments.
The Office of the Attorney General of Switzerland (OAG) said
on Thursday that it had filed an indictment against former FIFA Secretary
General Jerome Valcke, who it has charged with accepting bribes.
Venezuela’s PDVSA, where military officials took over
management in late 2017, is subject to sanctions from Washington, imposed in an
effort to oust the South American country’s President, Nicolas Maduro.
FINMA appointed an agent to investigate Julius Baer in 2017,
broadening its inquiries in 2018 after the arrest of a Baer banker in the
United States.
The watchdog said Julius Baer had to take steps to identify
bankers whose clients are a high money-laundering risk and adjust its pay and
disciplinary policy to avoid risk.
Baer said it had since improved and would take action
demanded by FINMA.
Vontobel analyst Andreas Venditti said the findings were
serious and he believed that some of the recent changes in Julius Baer’s
strategy needed to be seen in this context.
The bank last year appointed company insider Philipp
Rickenbacher as chief executive, replacing Bernhard Hodler, the former risk
chief who took over when Boris Collardi abruptly left in 2017 to help to run
unlisted rival Pictet.
Pictet, where Collardi is a managing partner and joint head
of wealth management, said Collardi and the bank declined to comment.
“What was already an open secret has now been confirmed.
Julius Baer sailed too close to the wind,” ZKB analyst Michael Kunz said in a
note.
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