After a 12-year investigation, Switzerland's federal Attorney General has charged Credit Suisse for its alleged involvement in a Bulgarian narcotics laundromat.

The Office of the Attorney General of Switzerland has pressed its charges in the Federal Criminal Court, indicting two alleged members of the Bulgarian criminal organisation and Credit Suisse AG, which it accuses of failing to take all the requisite steps to prevent the laundering of assets belonging to the narco-criminals. A former unnamed woman who worked at the bank as a manager has also been indicted before the court.

The criminal outfit

Since the start of the 'noughties and until 2012, if not later, a Bulgarian ex-wrestler allegedly built up and managed a cocaine-trafficking 'firm' that used 'mules' who used the airlines to transport the drug. The perpetrator has been convicted and sentenced to lengthy prison terms in several European countries, in particular in Italy in 2017.

The firm then paid the proceeds from the sale of the narcotics into bank accounts in Switzerland between 2004 and 2007, before using them to purchase real estate in Bulgaria and in Switzerland.

The Swiss context

On 1 February 2008, the Attorney General opened a criminal investigation on suspicion of money laundering. The Bulgarian wrestler – living in the canton of Valais and working primarily as a labourer – and his employer were in its sights. Between September 2008 and June 2015 the net gradually widened to take in Credit Suisse AG for a violation of Article 305bis numbers 1 and 2 SCC in conjunction with Article 102 SCC, and a former employee of a company in the Credit Suisse Group who had been responsible for setting up the ‘special finance transactions’ and who was also suspected of aggravated money laundering.

In March 2017, the Swiss employer of the Bulgarian wrestler was convicted by summary penalty order of aggravated money laundering. He allegedly committed his main offence in February 2006 by smuggling cash in bulk in his coach from Barcelona to Switzerland.

Indictment

The indictment charges: (i) a close confidant and financial advisor of the head of the organisation; (ii) the former Credit Suisse executive; (iii) Credit Suisse itself; and (iv) the Bulgarian wrestler living in Valais.

The financial structure that the close confidant (i) allegedly set up was established primarily in Switzerland, Austria and Cyprus. This ‘man of straw’ also served as a communication channel between the banks in Switzerland and the other members of the organisation and had an overview of the entire laundering process, intervening at all its levels. He is accused of having committed, between October 2004 and January 2009, acts intended to frustrate the identification of the origin and the seizure of funds of criminal origin to the value of more than SFr80 million.

Between July 2004 and December 2008, if not longer, the former executive of Credit Suisse AG (ii) was allegedly responsible for business relations with the criminal organisation. Until 2008, she carried out or arranged transactions on the instruction of the client, despite there being strong indications that the funds were of criminal origin, in contravention in particular of her due diligence obligations set out in in the Federal Act on Combating Money Laundering and the Financing of Terrorism (AMLA) and the Federal Banking Commission Ordinance on Combating Money Laundering and the financing of Terrorism (OBA-CFB). She allegedly impeded the bank's attempts to comply with its obligation to inform the Money Laundering Reporting Office Switzerland (MROS) of its suspicions.

The prosecutor accuses her of actively helping the criminal organisation feed the equivalent of around SFr16 million in criminal funds into legal circulation using a ‘back-to-back’ credit structure.

In the same period of time, Credit Suisse in Zurich (iii) "failed to comply with its obligation to consolidate or group the business relating to the same holder, beneficial owner or group of beneficial owners and its obligation to assign the same degree of risk to them." The prosecutor makes some play of the bank's alleged failure to follow its own internal AML directives. The employees, it says, did not do enough to 'clarify' the 'higher risk' transactions, and the controls exercised both by managers and by the compliance service were 'flawed.' Equally problematic was the fact that the processes of analysis, co-ordination and communication and the freezing of bank accounts were 'dysfunctional' and failed to prevent the flight of tainted assets amounting to the equivalent of around SFr35 million, even after the Attorney General issued a seizure order in August 2007.

Credit Suisse had been aware of these deficiencies at least by 2004 but let them continue until 2008, or even beyond, according to the prosecutor.

The Bulgarian wrestler living in the Valais (iv) is accused of having, between July 2005 and April 2009, committed acts intended to frustrate efforts to identify the origin of assets of SFr7 million.

To summarise things, Credit Suisse is accused of breaking Art 305bis nos 1 and 2 SCC in conjunction with Art 102 para 2 SCC [Swiss Criminal Code].

The three people are accused of committing the offence of aggravated money laundering (Art 305bis nos 1 and 2 SCC). The close confidant of the head of the organisation and the Bulgarian wrestler are accused of the offences of participation in a criminal organisation under Article 260ter SCC and forging documents under Article 251 SCC.   

Summary penalty orders

The first summary penalty order is issued against the former banker who allegedly worked in Geneva as an executive before resigning in the summer of 2007 in order to work full time for the criminal organisation.

The second and third summary penalty orders are directed against the ex-wife of the head of the criminal organisation and against her sister. The two sisters were involved in the financial and real estate transactions aimed at laundering the criminal organisation’s revenues in Switzerland. In addition, at least from July 2007 onwards, the sisters organised the gradual transfer of the criminal organisation’s assets in Switzerland to accounts held abroad where they could be more safely held.

The Office of the Attorney General has decided not to bring other suspects in this case to court, as it has issued them with summary penalty orders in which it asks the court to convict them for the offences described above. They have 10 days in which to object, or the order will "have the effect of a judgment." These summary penalty orders are still sealed.

Credit Suisse's reaction

Credit Suisse did not return calls by press time; nor did it answer questions when called directly; nor did it answer questions sent to it by email. Its sole discernible response to the indictment is to be found in a press release which stresses its incredulity at being charged.

The bank rejects the allegations about organisational deficiencies and intends to defend itself vigorously, noting sourly that the Swiss Federal Criminal Court can order the disgorgement of profits and also impose a maximum fine of SFr5 million in such proceedings. Compliance Matters asked it to divulge the amount of disgorgement for which the prosecutor is asking, but answer came there none.

At one point, according to Credit Suisse, the investigation included two former Credit Suisse employees and in 2013 was expanded to encompass allegations of organisational deficiencies at the bank. As a result of lengthy proceedings – during the course of which various allegations were dropped and others became time-barred – the Office of the Attorney General dropped its investigation against the second former employee, leaving the one remaining. Credit Suisse says that it is "astonished" at the "meritless" nature of the allegations raised against it and is convinced that its former employee is innocent.

The bank itself alleges that the Office of the Attorney General is accusing it of organisational deficiencies "based on rules and principles that did not exist at the relevant period, or refers to principles that were not applicable or to international standards that have deliberately not been implemented in Swiss law." Compliance Matters asked it to identify these rules and principles, but it has not.