Credit Suisse Group AG will pay the US Securities and Exchange Commission US$29.8 million (€25.6 million) to settle the regulator's charge that it obtained investment banking business in the Asia-Pacific region by contravening America's Foreign Corrupt Practices Act 1977. It will also pay a $47 million (€40.1 million) criminal penalty to the US Department of Justice.

The pertinent cease-and-desist order, made in the SEC's own private court, contains the penalty. The even greater $47 million payment is in fulfilment of a non-prosecution order involving the DoJ in which Credit Suisse Hong Kong admits responsibility for criminal conduct relating to ertain findings in the SEC order.

Jobs for the boys and girls

Between at least 2007 and 2013, according to the order, Credit Suisse provided valuable employment to the relatives and friends of certain foreign government officials in the Asia-Pacific region, at the request of those officials in the style of personal favours, in order to obtain or retain investment banking business or other benefits for the bank.

Because many of Credit Suisse’s clients were state-owned entities and because the people who wanted employment or internships for their relatives and friends were either executives of these bodies or government ministers with influence over them, the FCPA classifies the people who asked for the favours as "foreign government officials."

Credit Suisse, the order goes on to say, wanted to influence the foreign government officials 'corruptly' to secure banking business from the nationalised businesses. Many deals and substantial profits followed.

During its six years of transgressing, the bank offered employment to more than 100 people referred by (or connected to) officials in the region, the greater part of them (more than 60) referred by officials at more than 20 different Chinese state-run enterprises. Evidence suggests that many appointees treated their jobs as sinecures, to the despair of the experienced bankers who had to work with them.

Broken internal policies

The banking giant had written policies beginning in at least 2007 that prohibited the hiring of candidates referred to it by officials in order to obtain or retain business, but it treated these as mere window-dressing. At least one senior manager on the ground believed that restrictions on such hiring (perhaps by trusting Credit Suisse's existing campus recruiting programme to evaluate all entrants dispassionately) would 'kill' the bank's Far Eastern business. Many many so-called 'client referrals' were therefore waved through without any review by the bank’s legal and
compliance department.

SEC/DoJ jurisdiction

Why, one might wonder, should the SEC bother itself with the decision of a Swiss bank's subsidiary in Hong Kong to hire the offspring of Chinese princelings in contravention of its internal policies? The answer is that Credit Suisse lists some of its shares (American depository shares) on the New York Stock Exchange. This gives the DoJ and SEC jurisdiction over its activities elsewhere in the world.

The relevant statutory nexus is provided by s30A US Securities and Exchange Act 1934 which prohibits any issuer with a class of securities registered in accordance with s12 of the Act from corruptly giving or authorising the giving of anything of value to any foreign official for the purposes of influencing him or inducing him to act in violation of his lawful duties. The FCPA also applies to all firms that are so listed.