Nearly three years removed from a guilty plea in the U.S. to corruption charges linked with world soccer governing body Fifa, internal deficiencies continued to be exposed, this time by the Swiss regulator for «serious anti-money laundering failings».
«Finma conducted inspections at several Swiss banks to ascertain whether anti-money laundering (AML) rules had been upheld in connection with the alleged cases of corruption linked to Petróleos de Venezuela (PDVSA), a Venezuelan state-owned oil company, and Fifa, the world soccer federation,» the regulator said in a note.
«The proceedings, now concluded, found that Julius Baer was in breach of obligations to combat money laundering and its duty to put in place an appropriate risk management policy, representing a serious infringement of financial market law.»
Too Lax
According to Finma, the vast majority of the 150 sample transactions showed irregularities and the offenses occurred over a prolonged period between 2009 and 2018 with little to no response despite clear indications of potential money laundering.
For example, the regulator said that the KYC (know-your-client) documentation was «either incomplete or ambiguous for the vast majority of the audited business relationships». Information about clients' source of wealth, the reason for opening an account and related business was frequently missing, Finma explained, citing a 70 million francs transaction from «a large Venezuelan client» in 2014 that bypassed investigation even though the bank had already known that the client was facing accusations of corruption.
Pay Had Scant Regard to Compliance
It cited a case where a client advisor of Venezuelan clients in 2016 and 2017 received bonuses and other remuneration in the millions despite ongoing investigations in the market. In 2017, his bonus only received a 2.5 percent haircut after receiving a special bonus reserved for top performers in 2016.
«Julius Baer had a poor compliance and risk culture in which legal obligations to combat money laundering were not given the required degree of importance,» Finma said. «The bank’s remuneration system focused almost exclusively on financial targets and paid scant regard to compliance and risk management goals.»
Acquisition Ban
Recruitment and management of advisors, remuneration, discipline, and attention to anti-money laundering responsibilities from the board of directors were all underlined as deficient by Finma and in need of change. And until it implements changes that satisfy a Finma-appointed independent auditor, Julius Baer will be banned from conducting large and complex acquisitions.
«As is customary upon completion of proceedings against a bank, Finma will now examine whether to commence proceedings against any individuals,» Finma added.
