Bank Julius Baer, the Swiss private banking giant, recently admitted in federal court in Brooklyn that it conspired to launder more than US$36 million in bribes through the United States to officials of FIFA and other football federations.

The misconduct in question is outlined in a 'criminal information' charging the bank with conspiring to launder money. An 'information' is a formal criminal charge that begins a criminal proceeding in the courts. It is one of the oldest common-law pleadings (first appearing around the 13th century) and is nearly as old as the better-known indictment, with which it has always co-existed. It is no longer used in the United Kingdom (abolished in 1967) but the US Department of Justice still uses it.

The substance of the scam

During the relevant period between February 2013 and 27 May 2015, the information alleges, the bank, through its Argentine employee Jorge Luis Arzuaga, agreed with sports marketing executives and football officials to launder at least US$36,368,400 in bribe payments through the United States in furtherance of a scheme in which sports marketing companies bribed the officials in exchange for broadcasting rights to soccer matches. Between 2001 to 2012, Arzuaga worked as a relationship manager at other Swiss banks in Buenos Aires, Argentina and Zurich.

Prosecutors allege that Arzuaga intended, at least in part, to benefit the bank by generating fees and profits for it with his misconduct. His supervisors at Julius Baer approved certain transactions through accounts that he used, despite the existence of significant warning signs - for instance, they allegedly knew that Arzuaga was using fake documents to justify at least one payment to relatives of a football official. The US Government also accuses bank personnel of failing to investigate and deal with those signs of money laundering.

Arzuaga supposedly let his clients, Alejandro Burzaco (the controlling principal of Torneos, a sports marketing company, and its subsidiaries) and his firm, use their accounts at the bank to pay bribes in the furtherance of money-laundering efforts and also to use accounts in the names of two off-the-books shell companies, FPT Sports and Arco Business and Developments.

Arzuaga left 'Swiss Bank 1' [names have been blanked out] in 2012 for Julius Baer. He immediately began to transfer clients' bank accounts from the previous bank to newly opened accounts at the latter bank. His direct supervisor's manager directed members of the Latin America private banking team to “make sure that the subject accounts were opened as soon as possible, meaning immediately,” and stated that they could “count on [his] No Objection to be ‘fast tracked,’” adding: “Having 38 new accounts is what we are paid for and a good stress to have. Please use support from other teams if required. I can’t accept mourners in times like we are leaving [sic].” The bank respected the manager's wishes, despite the fact that a number of the accounts were held in the names of (or beneficially owned by) people associated with international football, which was generally understood to involve a high risk of corruption.

Prosecutors say that Julius Baer conspired to launder bribes from Torneos to football officials for the broadcasting rights to the Copa Libertadores tournaments. It is in respect of these prestigious events that, they say, Torneos sent more than $30 million in bribes and off-the-books payments from the Arco Account and the FPT Sports Account between approximately 2013 and March 2015. Crucially, several of these payments were made through accounts held in the United States.

A matter of honour

In a rare instance of a Swiss bank allegedly acting 'honourably' when handling dirty money for the recipient of a bribe who dies, the criminal information states that Arzuaga arranged for the transfer of the proceeds of bribery that he was holding in an FPT Sports sub-account to a deceased bribe-taking official's heirs. In many cases bankers turn the heirs away with assertions that no such accounts ever existed, as the son of former Nigerian dictator Sani Abacha found to his cost. This time, however, in November 2014 the bank executed a book transfer of approximately $16.5 million from the sub-account to an account at Julius Baer in the name of one of the dead official’s descendants.

A matter of remuneration

As payment for helping Torneos and Alejandro Burzaco, Arzuaga received cash bonuses from Torneos, including a payment in the amount of approximately $450,000 in January 2015 as thanks for his efforts in arranging the transfer of funds to the dead official’s heirs.

Compliance failures

In the words of the prosecutors, the compliance department "failed to adequately review the multiple financial transactions that represented the bribe payments made pursuant to these schemes and that bore significant indicia of money laundering, including facially dubious contracts and services purportedly rendered by shell corporations."

The rushed nature of the account openings (see above) was particularly deserving of condemnation, according to the criminal information. The document states that the bank intentionally conspired to transfer dirty money with the intent to promote wire fraud in violation of section 1343 Title 18 United States Code. It also accuses it of laundering money in breach of s1956 Title 18 USC.

Penalties

The bank has therefore signed a deferred prosecution agreement in which it submits to a three-year remediation regime. This acknowledges that things have improved at the bank since the days of the misconduct. In 2016 it embarked on “Project Atlas,” a three-year, $112 million AML initiative and “know your client” upgrade of all accounts that it held – not just highly risky ones. It completed this in 2019. It probably did this to fit in with another deferred prosecution agreement that it signed in 2016 with the Department of Justice’s Tax Division and the US Attorney’s Office for the Southern District of New York "for criminal violations relating to its efforts to US taxpayers [sic] in evading US taxes."

The DoJ and the US attorney's office for the Eastern District of New York called for a criminal monetary penalty of $43,320,000, which contains a 5% discount off the fine range in the US Sentencing Guidelines, and forfeiture of $36,368,400, representing the minimum amount of bribes allegedly laundered through the bank as part of the conspiracy. The bank "admits, accepts, and acknowledges that...the allegations described in the information...are true and accurate."