Swiss financial market regulator, FINMA, has ordered Julius Baer to pay SFr4m ($5m) for serious breaches of AML and compliance regulations, according to reports in the FT. The investigation revealed that the bank failed to adequately identify or act upon suspicious transactions involving high-risk clients between 2009 and 2019.

FINMA concluded that Julius Baer had committed a serious violation of its AML obligations by neglecting to thoroughly scrutinize transactions. The regulator found that the bank did not consistently detect or adequately follow up suspicious transactions, thereby creating an environment where potential illicit funds could pass through the institution.

This penalty follows a series of other regulatory actions and controversies surrounding Julius Baer in recent years, highlighting ongoing concerns about the bank’s ethical practices and adherence to compliance standards. These past issues include a significant money laundering scandal related to FIFA and PDVSA, which led to a temporary ban on large acquisitions for the bank in 2020, and a substantial £18m ($24m) fine by the UK’s FCA in 2022 for failures in managing conflicts of interest and financial crime risks.

Continued scrutiny

The recent regulatory action also underscores the continued scrutiny faced by Julius Baer, as well as other banks, and the persistent challenges within the financial industry to effectively combat money laundering and tax evasion. Regulators worldwide are increasingly focused on ensuring that financial institutions have robust frameworks in place to prevent the flow of illegal funds in order to maintain the integrity of the financial system.

Rob Mason, Director of Regulatory Intelligence at Global Relay, said: “Even the larger financial institutions continue to struggle to manage financial crime compliance obligations. While serious, this is not the largest order amount and may be seen as a message rather than a punishment for the second largest bank in Switzerland.

“It may also be the case of Julius Baer ‘inheriting’ a large number of clients from Credit Suisse who didn’t want to go to UBS, and this is a warning that they should inject further resources into their control framework to accommodate.”

Julius Baer has declined to comment. However, the bank has previously reiterated its commitment to strengthening its compliance and risk management systems. It remains to be seen what further measures the bank will take to address these ongoing regulatory concerns and ensure full compliance in the future.

The enforcement decision, seen by The FT, has not been publicly disclosed. FINMA has refused to show the document to GRIP: “There is no communication from our side. FINMA does basically not comment on its supervisory activities or individual cases or on any possible investigations or proceedings.”