Credit Suisse fined £147m

The failings relate to loans worth over US$1.3bn which the bank arranged for the Republic of Mozambique. The FCA said “these loans and bond exchange were tainted by corruption.”

Credit Suisse has agreed with the FCA to forgive US$200m of debt owed by the Republic of Mozambique as a result of these loans.

The regulator explained that between October 2012 to March 2016, Credit Suisse failed to properly manage the risk of financial crime within its emerging markets business. It had sufficient information from which it should have appreciated the unacceptable risk of bribery associated with the two Mozambican loans and a bond exchange related to government sponsored projects.

The FCA said 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. The contractor engaged by Mozambique on the projects was described as a “master of kickbacks”.

The regulator said the contractor secretly paid “significant” kickbacks, estimated at over US$50m, to members of Credit Suisse’s deal team, including two managing directors, in order to secure the loans at more favourable terms.

According to the FCA, while those Credit Suisse employees took steps to deliberately conceal the kickbacks, warning signs of potential corruption should have been clear to Credit Suisse’s control functions and senior committees. “Time and again there was insufficient challenge within Credit Suisse, or scrutiny and inquiry in the face of important risk factors and warnings. The Republic of Mozambique has subsequently claimed that the minimum total of bribes paid in respect of the two loans is around US$137m.”

The FCA fine is part of an approximate US$475m global resolution agreement announced today involving the US Department of Justice, the US Securities and Exchange Commission, and the Swiss Financial Market Supervisory Authority (FINMA).

Mark Steward, executive director of enforcement and market oversight at the FCA, 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$200m. The FCA will continue to pursue serious financial crime control failings by regulated firms.”

As a result, the Credit Suisse group expects to take US$230m in charges in the third quarter 2021. Credit Suisse said that “it is satisfied with the completion of the proceedings by US, UK and Swiss regulatory authorities into the bank’s arrangement of loan financing for Mozambique state enterprises and it can now draw a line under the observation matter.”

In the latest issue of Credit Strategy, the chief executive of the Consumer Credit Trade Association looks at whether the FCA is up to scratch and is available to view online now.