Julius Baer lets its bankers conduct own side deals, it has emerged. This has reportedly sparked the ire of Switzerland's finance regulator after a high-ranking banker's alleged Russian arms deals emerged.
The Swiss-based private bank Julius Baer has been tied to the unsanctioned sale of weapons by Swiss defense firm Ruag in Russia. Julius Baer's top banker in Moscow was reportedly involved in secret side deals by two top executives of Ruag, which is majority-owned by the Swiss government. Until 2014, the banker apparently sold ammunition to Russia through an offshore company.
Julius Baer apparently knew of the Russia banker's side business, Swiss daily «Neue Zuercher Zeitung» (in German) wrote on Tuesday – an undisclosed member of the bank's top management signed off on it. The bank didn't comment on the report.
Transparent Julius Baer Banker
In 2010, the banker submitted an application for his side business, a distribution firm called International Maritime Shipping Corporation Limited, or IMSC, to be approved, the newspaper reported. He clarified that the firm bought and sold security and defense products, and listed his business partners – many of them in the military or in private security firms.
Julius Baer's compliance overseer, also unnamed, noted that this type of business carried considerable risk to the bank's reputation, and represented a potential conflict of interest. The Moscow-based banker still managed to clinch approval to keep conducting his own business – from a member of top management at the time. He has since been suspended by Julius Baer.
Finma Laundering Probe
While Switzerland's prosecutor pores over the case, Swiss regulator Finma is also looking into Julius Baer, the paper reported. Finma has opened an enforcement probe to evaluate whether the bank exercised adequate due care in relation to corruption scandals including FIFA, the global soccer body, and Venezuelan oil firm PDVSA.
Neither Julius Baer nor Finma commented on the report. The regulator is currently conducting several enforcement probes in connection to money laundering allegations, but doesn't make its findings known until year-end.
Julius Baer got poor marks from two separate reviews of the dealings, one through auditor and consulting firm Deloitte and the other through Zurich law firm Wenger Plattner. Both found that the bank hadn't adequately evaluated risky clients, nor responded promptly or fully to dicey transactions, and failed to discern the source of wealth with some clients.
