Swiss regulator puts two banks on the naughty step following money laundering failures connected to Venezuela

The Swiss regulator, the Financial Market Supervisory Authority (FINMA), reprimanded two banks for breaking money laundering rules during dealings with Venezuelan entities.

Wrapping up a five-year investigation into 30 banks suspected of breaches relating to Venezuela’s state oil company PDVSA, FINMA has criticized

• Lugano-based Banca Zarattini and C
• BH Compagnie Bancaire Helvétique in Geneva.

Previously it reprimanded two former chief executives of private bank Julius Bär and investment bank Credit Suisse for anti-corruption failings.

FINMA began investigating Banca Zarattini in August 2019 over possible violations of money laundering rules between 2014 and 2018, linked to Venezuelan oil company PDVSA. 

In February 2020, CBH came under the spotlight after FINMA received information about possible violations of anti-money laundering (AML) rules between 2012 and 2020, connected with Venezuelan clients.

FINMA said The banks   

• “Were in breach of obligations to combat money laundering and their duties to put in place an appropriate risk management policy, representing a serious infringement of supervisory law.”
• And failed to have sufficient economic background checks into business relationships and transactions with increased money laundering risks, and lacked adequate documentation.

FINMA

• It has imposed a temporary ban on Banca Zarattini, accepting new Venezuelan and politically exposed people (PEPs) as clients.
• CBH Bank has been told to terminate any remaining business relationships with Venezuelan clients and review other risky client relationships.

It is thought that the cooperation of both banks before and during proceedings and the implementation of new operating, structural and HR-related processes to remove AML deficiencies has helped mitigate the penalties imposed.

However, FINMA says it will carry out checks at both banks to ensure effective implementation.

Wider tensions between the EU and Venezuela

In November 2017, the EU imposed sanctions on Venezuela over concerns of

• “The continuing deterioration of democracy, the rule of law and human rights.”

It imposed an embargo on arms, travel bans, and asset freezes on individuals.

In February 2021, 19 leading Venezuelan officials were added to its sanctions list – bringing the total number of individuals subject to sanctions to 55.

• In March 2018, Switzerland imposed similar sanctions, while continuing to provide humanitarian aid to Venezuela and the surrounding region.
• In 2019, Swiss direct investment in Venezuela stood at CHF2 billion and Swiss companies employed about 2,700 people in the country.

Switzerland’s censuring of five banks over dealings with Venezuela comes at a time when the US has seen several major AML events relating to Venezuela. These include

• The conviction of AML expert Bruce Bagley, who helped launder over $2m meant for the poor in Venezuela, and
• The extradition to the US of Colombian businessman Alex Saab (known as a financial fixer for President Nicolás Maduro of Venezuela), who is accused of laundering $350m in illicit money – allegedly through Switzerland.

In January 2021,  the US Treasury’s Office of Foreign Assets Control (OFAC)  sanctioned:

• Three individuals,
• 14 entities, and
• Six vessels

For their ties to a network attempting to evade US sanctions on Venezuela’s oil sector.

Sanctioning Swissoil, based in Geneva, OFAC said

• It had participated in the scheme by assisting in the sale and shipping of Venezuelan-origin crude oil to buyers in Asia.

OFAC said.

• “Swissoil was designated today for operating in the oil sector of the Venezuelan economy and because it has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of PDVSA”

Source

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