Swiss Federal Court’s Criminal Conviction of Credit Suisse and Its International Anti-Money Laundering Implications

Jonathan J. Rusch

Introduction

There can be no doubt that financial institutions in many countries have unambiguous obligations to comply with anti-money laundering (AML) laws, including Article 14 of the United Nations Convention Against Corruption (UNCAC) and domestic laws to execute its requirements. Nonetheless, in recent years a number of leading financial institutions that are well aware of those obligations have been subject to substantial criminal and civil financial penalties for their repeated AML compliance failures.  Most of those penalties, however, have come from only a few countries.  Since the start of 2018, for example, U.S. and United Kingdom authorities imposed AML-related financial penalties and sanctions on Commerzbank ($47 million), Bank Julius Baer ($79 million-plus), HSBC ($85 million), National Westminster Bank ($351 million-plus), Rabobank ($360 million-plus), Capital One ($390 million), and US Bancorp ($613 million), and Dutch criminal prosecutors penalized ABN Amro ($574 million) and ING Groep NV ($900 million).

By contrast, most other countries – including jurisdictions with global financial centers such as Switzerland and the United Arab Emirates – have not demonstrated a comparable resolve to impose significant financial sanctions on banks for significant AML failures, despite those countries’ commitments under the UNCAC to improve their domestic AML laws and enforcement. A recent decision by the Swiss Federal Criminal Court, however, provides some indication that Switzerland (an UNCAC signatory) is more prepared to prosecute financial institutions for AML-related offenses.

The Decision

On June 27, the Criminal Chamber of the Swiss Federal Criminal Court announced a judgment that encompassed multiple criminal cases stemming from the operations of a Bulgarian criminal organization that engaged in international narcotics trafficking and money laundering.

First, the Court sentenced Swiss-headquartered global financial services firm Credit Suisse to a fine of CHF 2 million ($2.1 million) for violating Article 102(2) of the Swiss Criminal Code (corporate criminal liability). It further ordered a claim for compensation against Credit Suisse of more than CHF 19 million ($19.7 million), as well as  confiscation of more than CHF 12 million ($12.5 million) in criminal assets in Credit Suisse accounts. The Court stated that it 

found deficiencies within the bank during the relevant period [(July 2007 - December 2008)]; this applies both to the management of customer relations with the criminal organization and to the monitoring of the implementation of the AMLA ("anti-money laundering") rules by the hierarchy, the legal service and the compliance department. These shortcomings allowed the assets of the criminal organization to be deducted, which led to the conviction of the bank's former employee for qualified money laundering. (Informal Translation)

Second, with regard to that employee (who reportedly cannot be named under Swiss privacy laws) the Court imposed a suspended sentence of 20 months’ imprisonment and a fine. It found that the employee, a Credit Suisse relationship manager during the 2007-2008 period, acted “as the guardian of the client relationship with the criminal organization” and

executed transfer orders or had them executed on the instructions of the client, although there were concrete suspicions regarding the criminal origin of the funds. Most of these orders concerned international transfers. Through its machinations, it contributed to the fact that the criminal organization was able to withdraw more than CHF 19 million [($19.7 million)] from the control of the state.

Third, the Court also imposed partially or wholly suspended sentences of imprisonment and fines on two Bulgarian nationals “for their involvement in a criminal organization and of suspected money laundering committed between May 2005 and January 2009”, and on “a former employee of another Swiss bank of supporting a criminal organisation and money laundering for helping to ‘launder’ assets worth more than CHF 7 million [$16.4 million] between July 2007 and November 2008 and for setting up a Swiss holding company intended to take over the organisation's assets.” With regard to these three defendants, the Court stated that it reduced the penalties in part because of the fact that that the offenses occurred well in the past.

Significance of the Decision

Although both Credit Suisse and the former relationship manager stated that they intend to appeal the judgments against them, the Credit Suisse judgment is significant for three reasons. 

First, it represents the first time that Swiss courts have convicted a Swiss-owned and domiciled bank for money laundering-related violations. Previously, in 2021 Falcon Private Bank, a now-defunct Abu Dhabi-owned bank with Swiss operations, became the first bank that Swiss courts had ever convicted of money laundering offenses. As the Swiss financial regulator FINMA does not conduct criminal proceedings or impose financial penalties or fines, the Credit Suisse case provides a significant precedent for Swiss criminal authorities to penalize domestic as well as foreign banks for substantial AML failures, and for criminal authorities in other countries that are UNCAC signatories to follow suit.

Second, the decision shows that under Swiss law, the Swiss Criminal Court is willing to hold financial institutions with deficient AML programs responsible for those deficiencies even after many years – in this case, nearly 20 years after the initial dealings by Bulgarian criminals with Credit Suisse began. That fact should prompt financial institutions doing business in Switzerland to review their AML programs’ past performance for multiple prior years and be prepared to make changes in those programs to address any substantial deficiencies or failures that may have occurred during that period.

Third, and most important from an international legal perspective, the judgment effectively undermines the ability of nations whose strategic AML deficiencies make them attractive to money launderers to temporize about or ignore their AML commitments under the UNCAC, including criminalization and criminal enforcement. If Switzerland, whose long standing reputation for rigorous financial secrecy made it a magnet for criminal proceeds, is now committed to pursuing money laundering conducted through Swiss-domiciled banks, other financial centers will be increasingly pressed to follow suit with their own banking systems, and thereby to increase the constriction of international money laundering.

Concluding Remarks

Switzerland, however, will need to demonstrate its commitment to rooting out money laundering in Swiss banks with more than a few isolated criminal cases. This means that, consistent with Switzerland’s obligations under UNCAC Article 14(1)(a), Swiss authorities need to ensure that the national comprehensive domestic regulatory and supervisory regime for banks and non-bank financial institutions is truly effective “to deter and detect all forms of money-laundering” (emphasis supplied), and that financial institutions and executives whose AML compliance programs fail to comply with that regime are appropriately sanctioned.

To that end, Switzerland needs to do more than pursue criminal prosecutions as appropriate. It should also expand the range of AML enforcement authority to civil and administrative measures, and (consistent with UNCAC Article 14(c)(5)) pursue closer coordination among national and subnational judicial, law enforcement, and financial regulatory authorities in order to combat money laundering more comprehensively.  For example, FINMA, Switzerland’s independent financial-markets regulator, currently has no power to impose fines or penalties. That needs to change if banks operating in Switzerland are to take their AML obligations seriously and to maintain effective AML compliance programs. Should that happen, and prosecutors and financial regulators can effectively coordinate their efforts, Switzerland can become a cynosure for other UNCAC signatory nations that seek to live up to their obligations under the Convention.

Author:

Jonathan J. Rusch is Co-Director of the U.S. and International Anti-Corruption Law Program and Adjunct Professor at American University Washington College of Law, where he teaches courses on anti-corruption law and financial crimes compliance, and Adjunct Professor at Georgetown University Law Center, where he teaches a course on financial crimes compliance.  Previously, he was Senior Vice President and Head of Anti-Bribery and Corruption Governance at Wells Fargo & Company, Deputy Chief of the Fraud Section of the Criminal Division at the United States Department of Justice, and Director of the Office of Financial Enforcement at the United States Department of the Treasury.  He can be reached at jrusch@wcl.american.edu.