Swiss regulator censures Lebanon’s largest bank for serious money laundering violations

The bank was found to have kept information from FINMA, failed to report suspicious activities to their MLRO, and bypassed PEP protocols.

The Swiss Financial Market Supervisory Authority, FINMA, found that Banque Audi (Suisse) SA, a Switzerland-based subsidiary of a large Lebanese banking group, breached its obligations in preventing money laundering and thereby “seriously violated” market law.

The bank has been investigated over its ties to Lebanon’s former central bank governor Riad Salameh following a complaint lodged with FINMA in 2022.

In a statement the regulator said that it has ordered the disgorgement of profits of CHF3.9m ($4.3m) and a capital surcharge of CHF19m ($20.9m).

“In the course of the proceedings, the bank has cooperated with FINMA and took measures to restore compliance with the law,” said the regulator.

Politically exposed persons

During an on-site inspection in 2021, FINMA reviewed the client relationships with politically exposed persons (PEPs) from several countries. In doing so, it discovered serious shortcomings in the prevention of money laundering. This prompted FINMA to open enforcement proceedings in 2022, which it has now concluded. 

As part of the on-site inspection, FINMA obtained all internal audit reports. In a specific report, the bank’s internal auditors had pointed out shortcomings in the prevention of money laundering with regard to certain relationships and demanded that measures be taken. However, this specific report was initially not mentioned to FINMA and was not submitted. 

Blatant violations of supervisory law

FINMA also found that the bank had inadequately clarified the origin of assets in high-risk client relationships and thus wilfully bypassed PEP protocols and AML regulations. FINMA gave examples:

  • A payment from a PEP was made into the account of a high-ranked Lebanese official. This amount was subsequently forwarded. Although the bank was unable to clarify the purpose of these transactions, it refrained from reporting them to the Money Laundering Reporting Office.
  • In other cases of client relationships with PEPs from other countries, there were press articles referring to the possibly unlawfully acquired assets of these persons. The bank did not sufficiently investigate these suspicions and was unable to dispel them. In doing so, the bank was in serious violation of anti-money-laundering regulations. 

Bank cooperation and corrective measures

In a statement, the regulator said that Banque Audi (Suisse) SA “has co-operated with FINMA in the enforcement proceedings”. The bank also took corrective measures which include:

  • replacing people in several key positions and significantly increased resources in compliance;
  • investigating certain client relationships in greater depth and submitting several MROS (Money Laundering Reporting Office Switzerland) reports;
  • parting ways with various clients.

However, the bank has decided to continue certain high-risk client relationships.

FINMA sanctions

In addition to the measures taken by the bank, FINMA has imposed further sanctions:

  • FINMA has ordered the disgorgement of illegally generated profits totalling CHF 3.9m ($4.3m);
  • FINMA also requires a risk surcharge of CHF 19m ($20.9m) on the minimum capital to be held (due to the retention of some high-risk client relationships);
  • FINMA has ordered additional corrections to the anti-money-laundering defence mechanisms. For two years or until these measures have been fully implemented, the bank may not enter into any new relationships with PEPs or high-risk corporate clients;
  • FINMA will appoint an audit mandatary to monitor implementation of the above-mentioned measures.

Individual responsibility

FINMA has refrained from initiating proceedings against individuals who were allegedly primarily responsible for the violations of supervisory law. The regulator said that this was because the individuals have left the bank and the Swiss financial centre.

Although the measures taken by FINMA have been applauded, there have been calls to hold individuals accountable for the money laundering violations.

“The severity of the measures taken by FINMA is unprecedented, asset confiscation remains an exceptional measure and we hope that the leaders of these banks are now personally held accountable for facilitating this widespread corruption,” said Zena Wakim, a lawyer and president of Swiss foundation Accountability Now.

Accountability Now are one of the seven Swiss and Lebanese groups that lodged a complaint to FINMA requesting an investigation into several banks tied to Mr Salameh.