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FINMA sanctioned Julius Baer because of money laundering
February 21, 2020| Finance News
FINMA sanctioned Julius Baer because of money laundering
Swiss regulator conducted an investigation at Julius Baer with regard to alleged cases of corruption linked to Petróleos de Venezuela S.A. (PDVSA), an oil company, and FIFA, the world soccer federation. As a result, FINMA has revealed numerous anti-money laundering violations and ordered to take all appropriate measures in combating them.
Regular breaches.
In 2017, FINMA appointed an agent in order to check whether Julius Baer adheres to anti-money laundering (AML) rules. Regulator criticised the bank with regard to the following aspects. First of all, Julius Baer didn't comply with due diligence and reporting requirements. FINMA checked 70 bank business relationships selected by risk level and 150 randomly selected transactions, and found the violations in almost all cases. Systematic failures in risk management were also identified - the bank did not always respond to signs of possible money laundering. The ongoing initiatives to reinforce compliance, such as Switzerland’s Financial market roadmap, emphasize the critical role of transparency and due diligence in the financial sector.
In 2017, FINMA appointed an agent in order to check whether Julius Baer adheres to anti-money laundering (AML) rules. Regulator criticised the bank with regard to the following aspects. First of all, Julius Baer didn't comply with due diligence and reporting requirements. FINMA checked 70 bank business relationships selected by risk level and 150 randomly selected transactions, and found the violations in almost all cases. Systematic failures in risk management were also identified - the bank did not always respond to signs of possible money laundering. The ongoing initiatives to reinforce compliance, such as Switzerland’s Financial market roadmap, emphasize the critical role of transparency and due diligence in the financial sector.
Julius Baer "did not know its customers".
Moreover, Julius Baer breached obligations in clients' identification and determination of sources of their income. Information about the origin of the funds, as well as information about the business relationships of the clients, was often missing in the bank's documents. FINMA states: "As an example, a CHF 70 million transaction was carried out in respect of a large Venezuelan client in 2014 without the required investigations, even though the bank had learnt in the same year that the client was facing accusations of corruption". Just as the regulator now focuses on emerging challenges such as FINMA climate risks, it is equally committed to strict enforcement against money laundering practices.
Moreover, Julius Baer breached obligations in clients' identification and determination of sources of their income. Information about the origin of the funds, as well as information about the business relationships of the clients, was often missing in the bank's documents. FINMA states: "As an example, a CHF 70 million transaction was carried out in respect of a large Venezuelan client in 2014 without the required investigations, even though the bank had learnt in the same year that the client was facing accusations of corruption". Just as the regulator now focuses on emerging challenges such as FINMA climate risks, it is equally committed to strict enforcement against money laundering practices.
Financial targets came first.
Julius Baer placed greater emphasis on financial targets rather than on compliance and risk management. These developments occur in parallel with internal FINMA board changes, aiming to enhance the institution’s effectiveness in oversight and regulation.
Thus, a consultant who specialised in clients from Venezuela in 2016-2017 received millions of bonuses, although Julius Baer informed the authorities about a number of suspicious Venezuelan clients, possibly related to PDVSA. Switzerland’s efforts to maintain Switzerland tax compliance also reflect the broader strategic goal of ensuring lawful financial operations at all institutional levels.
Julius Baer placed greater emphasis on financial targets rather than on compliance and risk management. These developments occur in parallel with internal FINMA board changes, aiming to enhance the institution’s effectiveness in oversight and regulation.
Thus, a consultant who specialised in clients from Venezuela in 2016-2017 received millions of bonuses, although Julius Baer informed the authorities about a number of suspicious Venezuelan clients, possibly related to PDVSA. Switzerland’s efforts to maintain Switzerland tax compliance also reflect the broader strategic goal of ensuring lawful financial operations at all institutional levels.
What's next?
After conducting its investigation, FINMA ordered Julius Baer to take measures in combating money-laundering violations. They include operating, structural and HR-related measures to improve anti-money laundering mechanisms. Additional requirements are as follows: identifying those client advisers whose client portfolio carries a high money-laundering risk and assessing each particular situation; to change its remuneration and disciplinary policy; establishment of a Board committee specialising in conduct and compliance issues; temporary ban on conducting transactions such as major acquisitions that lead to a significant increase in operating risks or in its organisational complexity.
Last but not least, FINMA is going to appoint an independent auditor with a view to monitor Julius Baer's compliance with the aforementioned measures. At the same time, structural improvements like the Banking act revision reinforce the legal framework under which Swiss banks must operate moving forward.
After conducting its investigation, FINMA ordered Julius Baer to take measures in combating money-laundering violations. They include operating, structural and HR-related measures to improve anti-money laundering mechanisms. Additional requirements are as follows: identifying those client advisers whose client portfolio carries a high money-laundering risk and assessing each particular situation; to change its remuneration and disciplinary policy; establishment of a Board committee specialising in conduct and compliance issues; temporary ban on conducting transactions such as major acquisitions that lead to a significant increase in operating risks or in its organisational complexity.
Last but not least, FINMA is going to appoint an independent auditor with a view to monitor Julius Baer's compliance with the aforementioned measures. At the same time, structural improvements like the Banking act revision reinforce the legal framework under which Swiss banks must operate moving forward.
Source: https://www.finma.ch/en/news/2020/02/20200220-mm-jb/
https://www.washingtontimes.com/news/2020/feb/20/swiss-bank-penalized-over-alleged-fifa-venezuela-c/
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.
https://www.washingtontimes.com/news/2020/feb/20/swiss-bank-penalized-over-alleged-fifa-venezuela-c/
Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.