ZURICH (Reuters) – Swiss bank Julius Baer (BAER.S) has been reprimanded by the country’s financial watchdog for ignoring money laundering risks in handling millions of francs of payments linked to corruption in Venezuela and world soccer body FIFA.
In a highly critical report, FINMA said there had been scores of failings at Switzerland’s third-largest listed bank, such as its acceptance of a 70 million Swiss franc ($71 million) transfer for a Venezuelan customer in 2014 despite knowing he was accused of corruption.
The regulator’s announcement, which outlined serious lapses as recently as 2018, comes as Switzerland seeks to change its image as one of the world’s most opaque and secretive financial centers.
Under pressure from tax authorities abroad, the Alpine nation pared back banking secrecy, though some experts say its concessions apply to rich countries rather than poor ones and recent scandals show money laundering remains a major risk.
FINMA told Julius Baer to improve its controls and appointed an auditor to oversee the group. Nonetheless, it did not make use of its power to demand the return of profits linked to wrongdoing, meaning the bank faces no financial penalty.
In a similar case in 2016, FINMA confiscated 95 million Swiss francs from Swiss bank BSI only to have its decision overruled by a Swiss court in December.
The watchdog on Thursday said it had uncovered systematic failings and management inaction on money-laundering risks, with the vast majority of the 150-plus sample transactions it had examined showing irregularities between 2009 and early 2018.
Julius Baer acknowledged the lapses.
“We accept FINMA’s findings and regret the shortcomings identified in our business with Latin American clients,” said Chairman Romeo Lacher. “This is not compatible with the risk culture that we are striving to achieve.”
The bank’s shares were down 1.9% by 1448 GMT.
The failings were connected to cases of corruption linked to Venezuelan oil company PDVSA and global soccer governing body FIFA, the regulator said.
FIFA has been embroiled in a bribery scandal that led to former president Joseph Blatter and former vice-president Michel Platini being banned from soccer in 2015 over illicit payments.
The Office of the Attorney General of Switzerland (OAG) said on Thursday that it had filed an indictment against former FIFA Secretary General Jerome Valcke, who it has charged with accepting bribes.
Venezuela’s PDVSA, where military officials took over management in late 2017, is subject to sanctions from Washington, imposed in an effort to oust the South American country’s President, Nicolas Maduro.
FINMA appointed an agent to investigate Julius Baer in 2017, broadening its inquiries in 2018 after the arrest of a Baer banker in the United States.
The watchdog said Julius Baer had to take steps to identify bankers whose clients are a high money-laundering risk and adjust its pay and disciplinary policy to avoid risk.
Baer said it had since improved and would take action demanded by FINMA.
Vontobel analyst Andreas Venditti said the findings were serious and he believed that some of the recent changes in Julius Baer’s strategy needed to be seen in this context.
The bank last year appointed company insider Philipp Rickenbacher as chief executive, replacing Bernhard Hodler, the former risk chief who took over when Boris Collardi abruptly left in 2017 to help to run unlisted rival Pictet.
Pictet, where Collardi is a managing partner and joint head of wealth management, said Collardi and the bank declined to comment.
“What was already an open secret has now been confirmed. Julius Baer sailed too close to the wind,” ZKB analyst Michael Kunz said in a note.
($1 = 0.9831 Swiss francs)
Writing by John O’Donnell; Editing by David Holmes and David Goodman