Last week, a Swiss court demanded compensation of $45 million from Credit Suisse in a money laundering case concerning a Bulgarian drug ring. Switzerland’s second largest bank, has been accused of major organizational lapses and of failing to take all necessary measures to prevent money laundering. According to the Swiss federal prosecutor, the Bulgarian drug syndicate, led by a top-level wrestler, allegedly deposited CHF55 million at Credit Suisse, much of it hand-delivered in suitcases. The news comes as Credit Suisse attempts to rehabilitate its reputation after a number of fines and the sudden departure of its chairman as the bank was hit by a collapsed US-based hedge fund named Archegos Capital Management, which was followed by the Greensill Capital scandal. The twin scandals also resulted in the bank receiving its first major credit downgrade. As a result, Credit Suisse announced a profit warning because of its woes and slowdown in its trading and asset management divisions as the cost of non-compliance takes center stage.
The effects of money laundering and financial crime lapses have been front and center in the news over the last few months. We’ve seen institutions lose substantial market share, executives criminally charged, and billion-dollar fines assessed. Now, there is no doubt that a failure to have adequate compliance controls, especially in highly regulated industries such as financial services, is detrimental to both the reputation and the financial stability of a company. This is just the beginning. We can expect to see greater emphasis and inclusion of compliance metrics in credit ratings in the coming months and years as Credit Suisse experienced. Given the importance that credit ratings play in both access to and cost of capital, institutions will place an even greater emphasis on compliance. And for the industry leaders who choose to take compliance seriously and are willing to validate it, we expect that they will benefit from increased opportunities, more trusted relationships and a greater potential for success.