Saturday, December 19, 2009

Credit Suisse's Secret Deals

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The Wall Street Journal

U.S. Attorney General Eric Holder said Credit Suisse Group helped clients in Iran and elsewhere conduct financial transactions in secret, saying Wednesday that the Swiss bank "established a business model to allow these rogue players access to U.S. dollars." Mr. Holder and Manhattan District Attorney Robert Morgenthau detailed a decadelong effort by the bank to carry out transactions from Iran, Libya, Sudan, Burma and Cuba. The men announced a $536 million settlement by Credit Suisse, one of several banks accused in a long-running case that has netted roughly $1 billion in fines. The bank, which paid the biggest of the fines, reached a 24-month deferred prosecution agreement, meaning it could face criminal prosecution if further problems occur. Mr. Holder said Credit Suisse built a business based on actively helping its clients avoid detection by U.S. authorities on their financial transactions. The bank produced a pamphlet titled, "How to transfer USD payments" and told Iranian clients that bank employees would check each message individually to make sure it would avoid detection. The bank also circulated images of payment applications showing how to properly format them to avoid detection. "The settlement we announce today ensures that Credit Suisse will not flout the law again for its own financial gain," Mr. Holder said. The Credit Suisse fine comes as the U.S. is intensifying efforts to use the global financial system to pressure Iran into giving up its nuclear program and international terrorism. President Barack Obama has pledged to enact new economic sanctions on Iran at year end if Tehran doesn't respond to international calls for negotiations on the nuclear arms question. Banks and other companies that help Iran and other sanctioned countries skirt sanctions will face a "severe penalty" because they risk "destabilizing not only the Middle East but the entire world," said Mr. Morgenthau.

Credit Suisse exited the business in question, which employed several dozen people, in 2005. It did its own investigation and cooperated with authorities. The firm said it "takes this matter very seriously," and "has enhanced its procedures to prevent practices of this type from occurring." By 2007, the firm closed its Tehran office and terminated business with all parties sanctioned by the U.S. Department of the Treasury's Office of Foreign Asset Control. The fine was among the largest ever for Credit Suisse, which survived the credit crisis better than many competitors and has been gaining ground in trading and banking businesses in the U.S. It also comes after an effort by U.S. tax authorities to get Swiss banks to name Americans using the banks to evade taxes. The investigation started in 2006 by the Manhattan district attorney's office showed that Credit Suisse processed more than $700 million in payments that violated U.S. sanctions between 2002 and 2006. It also processed $1.1 billion in payments manipulated to hide their Iranian origin, often manually reviewing trades, an official in Mr. Morgenthau's office said. A London-based Credit Suisse asset-management unit also illegally invested $150 million on behalf of a banned state-affiliated bank in Libya and one in Sudan, the agreement said. The bank "accepted and acknowledged responsibility for its criminal conduct in violating the International Emergency Economic Powers Act," the Justice Department said. The $536 million to be forfeited by Credit Suisse will be split by the U.S., New York state and New York City. It was the largest forfeiture on record for violations of the act, government officials said. (Read more...)