A cocaine-smuggling Bulgarian wrestler and briefcases stuffed with banknotes are hampering scandal-weary Credit Suisse Group AG’s bid to return to boring banking.
The Zurich bank, which has suffered a slew of bad headlines over the past two years, and a former client relationship manager go on trial Monday accused of failing to prevent money laundering by customers working with the fighter-turned-criminal.
The Bulgarian, later convicted for drug offenses, allegedly tapped his friends to use Zurich branches of Credit Suisse to launder proceeds from his drug smuggling.
Swiss prosecutors can press criminal charges against banks if they believe those institutions didn’t do enough to screen clients and their cash for obvious ties to illicit activity. The female ex-Credit Suisse manager, who can only be named as E. under Swiss reporting restrictions, accepted deposits of used bank notes that regularly exceeded 500,000 euros ($564,000) at a time, according to the 515-page indictment.
E. carried out the transactions despite “strong indications as to the criminal origin of the funds, without clarifying or sufficiently clarifying the economic background of the transactions and without checking the plausibility of the explanations and supporting documents,” said prosecutors.
Gregoire Mangeat, a lawyer for E., declined to comment before the trial but said he will plead for her full acquittal.
Credit Suisse said in a pre-trial statement that it “unreservedly rejects as meritless all allegations in this legacy matter raised against it and is convinced that its former employee is innocent.”
The trial comes as the 166-year-old bank has staggered from one setback to another. First there was a corporate spying scandal involving senior executives, then Credit Suisse’s involvement with doomed finance company Greensill Capital, and its billions of dollars of losses from the implosion of one of its trading customers, Archegos Capital Management. Last month brought the abrupt resignation of Chairman António Horta-Osório.
For all the indictment’s tawdry details, the case stands out for another reason: it’s the first time that a Swiss bank faces a criminal trial in Switzerland.
Falcon Bank was found guilty by the same court on similar charges in December and fined 3.5 million Swiss francs ($3.8 million). But now-defunct, Zurich-based Falcon was owned by Abu Dhabi investors.
Credit Suisse expressed its “astonishment” in late 2020 when Swiss prosecutors publicly charged it with money laundering offenses, given the alleged crimes took place between 2004 and 2008.
The statute of limitations for prosecuting suspected money laundering is seven years, or 15 years for aggravated money laundering, and the bank’s court lawyers are expected to challenge the right of prosecutors to include evidence before 2007.
The bank has said it hired independent experts in 2016 to assess its compliance set-up and that it was deemed to be correct and appropriate at the time. Credit Suisse lawyers will likely also press prosecutors to prove that its handling of the transactions violated rules in place over 15 years ago.
The case dates to 2008 when prosecutors opened a probe into a Bulgarian wrestler whose training funding had dried up after the collapse of the Iron Curtain, fell in with a mafia clan and had turned to drug trafficking to make cash.
From 2002 to 2012, he organized the import of tens of tonnes of cocaine into Europe, using boats, planes and drug mules willing to swallow cocaine-packed rubber balls. He was sentenced to a 20-year prison sentence in Italy in 2017, and also convicted by courts in Romania and Bulgaria.
Two of his associates are also on trial at the federal criminal court in Bellinzona, accused of participation in organized crime and aggravated money laundering. A lawyer for the first declined to comment and a lawyer for the second didn’t return a message seeking a response.
E. actively assisted the drug ring to launder 16 million francs and, overall, helped obscure the illicit origins of transactions worth more than 140 million Swiss francs, according to the prosecutors.
If convicted E. could face up to five years in prison. But for Credit Suisse, any potential penalties would be lower in Switzerland than other jurisdictions such as the U.S. If found guilty, the bank risks a maximum fine of just 5 million francs.
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