Laying The Smackdown, Gently

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What's going on?

On Monday, Switzerland’s financial watchdog, FINMA, rapped investment bank Credit Suisse over the knuckles for failing to prevent money laundering at the firm (tweet this).

What does this mean?

Unlike US regulators (which fined RBS $5 billion in May, bringing its total haul from the global financial crisis fines to $65 billion), FINMA doesn’t have the power to issue fines. Instead, it’s insisted that Credit Suisse improves its internal processes to stop money laundering by the end of 2019 – and has appointed an independent auditor to make sure the bank follows through.

FINMA said that a former employee who committed fraud was rewarded by Credit Suisse with higher pay and positive performance reviews, rather than sanctions – and that poor controls and systems also allowed the company to get caught up in the corruption scandal involving FIFA.

Why should I care?

For markets: All bark and no bite.

In avoiding fines, Credit Suisse has done better than a handful of other European banks. Dutch bank ING Group was handed a $900 million penalty for failing to spot money laundering at its firm, and Danske Bank (from Denmark, no less) is being investigated by the US regulators for similar reasons – and they’re not shy about issuing fines (just ask Société Générale). And, while Swiss peer GAM hasn’t been fined for one of its managers’ poor record keeping, some might argue a 35% drop in its stock price since July is a fine by itself.

The bigger picture: Not the icing on the cake Credit Suisse was hoping for.

Last quarter, investors heralded Credit Suisse’s turnaround (from a shaky bank in need of new money to a hub for the ultra-wealthy) all but complete. But Monday’s ruling perhaps suggests there’s more work to be done. The financial watchdog acknowledged the bank’s improved since 2015 (its investigation covered 2006-15) but it still thinks Credit Suisse’s checks and balances aren’t quite where they need to be. Keep that turnaround turning…

Originally posted as part of the Finimize daily email.

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