Credit Suisse has announced settlements totaling nearly $700 million with British and U.S. authorities over lending to Mozambique state-owned companies that Swiss regulators say violated anti-money laundering rules.
The Swiss financial markets authority also required the Zurich-based bank, Switzerland's second-largest, to improve its risk controls.
Credit Suisse said late Tuesday that its U.S. settlement involved some $275 million. The bank said it would pay a $200 million penalty under an agreement with Britain and forgive $200 million in loans to the southern African nation. It said it expects to take a $230 million charge in the third quarter in connection with the settlements, which are tied to activities between 2013 and 2016.
The bank’s British subsidiaries in 2013 arranged two loans guaranteed by Mozambique’s government totaling $1 billion — equal to nearly 6% of the country’s economic output — to state-owned companies ProIndicus and Empresa Mocambiana de Atum, or EMATUM, the Swiss authority said. The loans were mostly intended to be used to pay for maritime security vessels and a tuna fleet, it said.
Several people in the African country, including former government officials, have been accused of bribery, embezzlement and money laundering related to the loans. U.S. prosecutors also charged five people, including former Credit Suisse bankers Andrew Pearse, Surjan Singh and Detelina Subeva, in the $2 billion fraud involving sham naval, fishing and other projects in Mozambique.
The Swiss financial market authority, FINMA, said Credit Suisse had violated its duty to file a “suspicious activity report” in the case and didn’t properly attend to the risks in some lending transactions with governments.
“There are high reputational risks associated with large loans to financially weak or corruption-prone countries,” FINMA said. “Credit Suisse seriously violated the organizational requirements and the (Anti-Money-Laundering Act) reporting obligations in connection with loans it made to state-owned companies in Mozambique in 2013.”
The Swiss authority said Credit Suisse has already taken some steps to improve its risk-management and control systems, but that it would appoint an independent third party to review the measures put in place and make sure they are effective.
It also said Credit Suisse’s existing credit transactions with “financially weak and corruption-prone state or companies with guarantees from such states” must be reviewed by an independent third party.
“The Republic of Mozambique welcomes the admission by Credit Suisse to regulators today of criminal wrongdoing. This is an important step towards obtaining full redress for the people of Mozambique," said Keith Oliver, head of international at Peters & Peters law firm, which has been working on the case on behalf of Mozambique's attorney-general's office.
Oliver said the African country “remains committed to bringing those responsible to justice" through criminal prosecutions in Mozambique and pursuing civil proceedings in the UK.
Nineteen people, including the son of former President Armando Guebuza, are standing trial in Mozambique's capital, Maputo, on charges related to the loans, including bribery, embezzlement and money laundering. They deny the accusations.
Mozambique’s former Finance Minister Manuel Chang, has been in custody in South Africa since 2018 awaiting extradition to either the U.S. or Mozambique to face charges related to the loans.
The settlements close the British, Swiss and U.S. cases.
The Mozambique case highlights yet another episode of troubles for Credit Suisse. Earlier this year, FINMA said it was looking into possible penalties against Credit Suisse over its announcement of billions of dollars in losses linked to a default on margin calls by U.S.-based Archegos Capital.
Associated Press writer Andrew Meldrum contributed from Cape Town, South Africa.
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