The Financial Conduct Authority (FCA) has issued a £147m fine to Credit Suisse due to severe due diligence deficiencies linked to dealings with the Republic of Mozambique.
The fine was due to financial crime due diligence failings related to loans worth $1.3bn, which Credit Suisse arranged for the Republic of Mozambique. According to the FCA, these loans, and a bond exchange, were tainted by corruption.
The FCA agreed with Credit Suisse that it would forgive $20m of debt owed by the Republican of Mozambique as a result of the tainted loans.
Between 2012 and 2016, the FCA found that Credit Suisse had failed to properly manage the risk of financial crime within its emerging markets business. The bank had ‘sufficient’ information from which it should have appreciated the unacceptable risk of bribery associated with the two Mozambican loans and a bond exchange linked to government-sponsored projects.
The financial authority highlighted that Credit Suisse was aware Mozambique was a jurisdiction where the risk of corruption of government officials was high and that the projects were not subject to public scrutiny or formal procurement processes.
It was found that the contractor engaged by Mozambique secretly paid significant kickbacks, estimated at more than $50m, to members of the deal team at Credit Suisse, including two managing directors in order to secure loans on more favourable terms. Following the corruption, the Republic of Mozambique has subsequently claimed that the minimum total of bribes paid in respect of the two loans is around $137m.
According to the FCA, the fine is part of an approximate $475m global resolution agreement that involves the US Department of Justice, the US Securities and Exchange Commission and the Swiss Financial Market Supervisory Authority.
The financial authority stated it took into account Credit Suisse’s undertaking to forgive $200m of debt owed by the Republic when deciding on its financial penalty, as well as the fact the bank agreed to resolve the case with the FCA, qualifying it for a 30% discount on the total penalty. Without the discount and the debt relief, it is likely the penalty would have been significantly larger.
FCA executive director of enforcement and market oversight Mark Steward said, “The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique. The fine would have been higher if not for Credit Suisse agreeing to provide the debt write-off of US$200 million. The FCA will continue to pursue serious financial crime control failings by regulated firms.”
Copyright © 2021 RegTech Analyst
Copyright © 2018 RegTech Analyst