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But what does that say about the law? And the bank?

The 'Suisseleaks' scandal, whose disclosure is being coordinated by the Organized Crime and Corruption Reporting project, confirms what many suspected after the 'Panama Papers' and the 'Pandora Papers'1. A huge network of banks, lawyers, company formation agents, accountants, nominee directors and trust agents exists to help the rich and powerful move their wealth around and keep it out of the public gaze.

One might well ask how this can be happening when the Financial Action Taskforce has since 9/11 been issuing globally-applicable guidelines for combatting Money Laundering and the Financing of Terrorism2. These guidelines have been converted into EU and national law, through EU Money Laundering Directives and the UK's 2017 Money Laundering Regulations, as examples.

The network of helpers all count as 'obliged entities' under that legislation, along with estate agents, art dealers, auction houses, jewellers, and any other merchant in valuable goods.

The problem with the legislation is that it is very expansive and detailed on what checks have to be carried out by such 'obliged entities', including extra checks to verify the Ultimate Beneficial Ownership of assets if that is not clear at first glance, and to identify so-called Politically-Exposed Persons. There is detailed guidance on when Enhanced Due Diligence must be carried out.

The legislation is, conversely, very light on clear triggers for turning the business away. The triggers for suspecting a connection with terrorism are easier to grasp than those for suspecting money laundering. Money laundering being defined as handling the proceeds of crime, a young person coming into a bank branch with £20,000 in cash to deposit and no clear story as to its source puts themselves right in the frame.

This contrasts with a prominent businessman from a foreign country asking for banking facilities in Switzerland, with US$25 million to deposit and invest, and with a story that their business is the supply of air conditioning equipment in a hot country, or that their company enjoys a monopoly over duty free shops at a major airport: thatís a story that stands up, with a few extra checks.

Credit Suisse's clientele falls into this category; if the person has not been convicted a crime in any country, there is no trigger in the FATF guidance that tells the bank not to go ahead. After all, this kind of business is the prime target market of the bank's Wealth Management division and the account, probably managed at the bankís discretion, can be relied upon to swallow a slice of any share or bond issue that Credit Suisse has underwritten and whose market price has fallen below the level at which the bank bought it. The client is hardly going to kick up a fuss in public, like by making a claim against the bank to a financial ombudsman for being allocated US$50,000 of overpriced shares.

Credit Suisse has broken no laws. However, 'Suisseleaks' is another reputational disaster, coming on top of the recent loss of two sets of senior management (one for failing to adhere to Covid restrictions3, the other for setting private investigators onto an employee4) and the Archegos hedge fund disaster, under which the bank lost a reported US$5.5 billion5.

Credit Suisse might find that their policy of banking these kinds of client sees them shunned by counterparties concerned with the risk of reputational contagion. Once that starts to happen, a bank can find that its new business intake consists only of the marginal transactions that other banks have already turned away, and that can be a trend that is extremely hard to reverse.

Bob Lyddon is an author for accountingcpd. To see his courses, click here.






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