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Regulatory Fines: Is this the ‘New Normal’



We live in a time where bribery and corruption scandals seem (sadly) more prevalent than ever. A surprising story surfaced this week regarding the investment bank, Credit Suisse.


The Financial Conduct Authority (FCA) has announced a fine of over £147million for corruption, part of a wider form of $475 million between the US, Swiss and UK financial regulators[1].


The allegation was corruption – allegedly, the bank staff took and paid bribes through various loan arrangements. The FCA has stated that a Mozambique government contractor secretly paid ‘significant kickbacks’, estimated to be over $50 million, to the members of the Credit Suisse deal team. It is estimated that the corruption took place for four years between 2012 and 2016, during which the government contractors secured loans for more favourable rates, without sufficient due diligence being carried out.


Mark Steward, the Executive Director of Enforcement and Market Oversight at the FCA, said,


‘The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique. The FCA will continue to pursue serious financial crime control failings by regulated firms.’[2]

While the FCA notes that Credit Suisse employees deliberately took measures to conceal the kickbacks, their internal compliance functions should have seen clear signs that serious corruption was occurring.


Lessons Learnt?


Time and time again, we see banks fined for failing to conduct the relevant due diligence and for financial crime failings. Stories such as this, highlight the importance of several things:


  1. Financial institutions (FIs) need to have sufficient resources in place to ensure the adequacy of their compliance teams;

  2. FIs need to have effective training measures in place to ensure that all staff are properly trained in order to identify and assess financial crime failings;

  3. Appropriate internal controls need to be in place to identify and highlight potential breaches; and

  4. FIs need to have strict internal compliance regimes, which include stringent due diligence and know-your-customer (KYC) measures on their clients.


How Can Lysis Help?


There are several ways in which Lysis can help. We have expert teams in place and a wide range of offerings:


  1. Managed Service and Resourcing: Lysis Operations offer Anti-Money Laundering (AML) execution for client on-boarding, refresh and remediation measures – including client outreach, due diligence, regulatory classification, Politically Exposed Persons, (PEPs) sanctions and screening – and AML transaction monitoring execution. We also provide surge resourcing, managed teams and a fully managed service to financial service institutions, including wholesale and investment banks as well as organisations from a range of other regulated industries, such as estate agency businesses.

  2. Training and Certification: Lysis Academy provides practical and bespoke AML and KYC training to develop teams of analysts, structured team development (hire-train-deploy) and continuous professional development (CPD). In addition, we can offer training needs assessment and training programme development.

  3. Consulting and Advisory: Lysis Financial delivers expert consulting in AML, AML reviews and maturity assessments, policies and procedures and preparation for regulatory visits and regulatory remediation (e.g., after a UK Section 166 intervention). In Client Lifecycle Management (CLM), we are experienced with defining CLM strategies as well as operating models and frameworks, including policies and procedures for client on-boarding (COB) and KYC.


 

Lauren Parmenter

Consultant



[1] https://www.bbc.co.uk/news/business-58974089 [2] https://www.fca.org.uk/news/press-releases/credit-suisse-fined-ps147190276-us200664504-and-undertakes-fca-forgive-us200-million-mozambican-debt

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