US authorities outline scope of Credit Suisse wrongdoing

For more than a decade Credit Suisse violated US law by falsifying wire transfers of hundreds of millions of dollars and engaging in other criminal activities to do business with countries banned from the American financial system, such as Iran and the Sudan, according to officials in Washington.

The US justice department outlined this week why the Zurich-based bank has agreed to pay 536 million dollars to settle a case that gives yet another black eye to Swiss banking.

“In both its scope and complexity, the criminal misconduct perpetuated by Credit Suisse in this case is simply astounding,” US Attorney General Eric Holder told a press conference in the American capital on Wednesday.

“This case offers a stark and disturbing example of the lengths to which some corporate wrongdoers are willing to go in seeking ill-gotten financial gains.”

Beginning as early as 1995 and continuing through 2006, Credit Suisse in Switzerland and in Britain deliberately removed information, such as customer and bank names and addresses from wire transfers of money to the US, according to court documents.

The changes were made so the transfers from Iranian and other clients from countries under US sanctions could pass undetected through the American financial system.

“This scheme allowed US sanctioned countries to move hundreds of millions of dollars through the US financial system,” the justice department said in a news release.

“For more than a decade Credit Suisse did business with and for countries that the United States had specifically banned from our financial systems,” Holder said.

He noted that Credit Suisse, like all major global banks, realized that the US would not process financial transactions from individuals or companies in places like Iran, Libya, Sudan, Burma and Cuba.

“But rather than adhere to the law and to decline to serve these customers, Credit Suisse established a business model to allow these rogue players access to US dollars,” Holder said.

“At one point the company even developed a pamphlet for its Iranian clients, explaining how to fill out payment messages so as not to trigger US filters,” he said. “They created a how-to book on committing a crime – and it worked well for years.”

The revelations by the American authorities show that the Credit Suisse activities went well beyond lack of due diligence to involve a deliberate plan to evade the US sanctions.

Court documents revealed that the bank processed 88 payments for individuals and entities listed as “specially designated nationals” subject to US sanctions.

For its Iranian clients, Credit Suisse promised that no message would leave the bank without being hand-checked by a Credit Suisse employee to ensure that it had been formatted to avoid US “filters,” the justice department said.

“In essence, Credit Suisse said to sanctioned entities,’We’ve got a service, and that service is helping you evade US banking regulations´,” said Assistant Attorney General Lanny Breuer of the department’s criminal division.

The bank has admitted to violating the US International Emergency Economic Powers Act (IEEPA) and committed to enhancing its sanctions compliance programmes.

It issued a news release earlier this week saying that it expected to pay the 536-million-dollar penalty, the biggest forfeiture ever made for IEEPA violations, but it did disclose the details of its activities.

The news has had little initial impact on Credit Suisse shares, which rose 0.19 percent on the Swiss Exchange in Thursday morning trading on the Swiss exchange.

But by early afternoon the stock dropped 2.46 percent to 51.45 francs.

The bank said it had already recorded provisions for the case at the end of the third quarter of 2009, when it was still under investigation.

But it expects to record an additional pre-tax charge of 445 million francs for the fourth quarter of 2009, which is estimated at about 360 million francs after tax.

Under the terms of the deal, Credit Suisse waived an indictment on a criminal charge and admitted full responsibility for its criminal misconduct.

The justice department said it will recommend full dismissal of the charge in two years “provided Credit Suisse fully cooperates with, and abides by, the terms of the agreement.”

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