Credit Suisse money-laundering case faces axe in boost to UBS

UBS Group is set to dodge one of the long list of legal problems it inherited from its takeover of Credit Suisse, as Geneva’s top financial-crimes prosecutor prepares to shut down a money-laundering probe targeting the failed bank.  

Just a year after saying there were grounds for indicting Credit Suisse in a case related to a rogue banker, Yves Bertossa last month informed the parties he now plans to drop the investigation, said people familiar with the matter who spoke on condition of anonymity.

Bertossa did not give an immediate timeframe for when he would formally close the probe, but asked those concerned to lodge any objections by last week, the people said. 

Credit Suisse’s mishandling of Patrice Lescaudron, the Geneva banker-turned-fraudster, cost it dearly. A string of court losses from Bermuda to Singapore left the bank facing a damages bill in the hundreds of millions of Swiss francs. The losses also exposed the lender’s cavalier approach to compliance and contributed to the plunge in investor confidence that ultimately required it to be rescued by rival UBS.

The Lescaudron case is one of more than a half-dozen that UBS must now grapple with. It faces the negative publicity of a trial in London over a Mozambican bond scandal unless it settles the case; UBS has said that Credit Suisse’s legal liabilities could run up to as much as US$4 billion over 12 months.

Before his U-turn, Bertossa previously highlighted eight transactions Credit Suisse had failed to prevent between 2008 and 2014, which he said constituted aggravated money laundering. Under Swiss law, a failure to stop illicit money moves can be tantamount to money laundering if the negligence and amounts are deemed serious enough. 

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The prosecutor’s decision last month was based on the fact that Lescaudron was convicted of fraud and forgery, not money laundering, said one of the people. The person added that Bertossa acknowledged Credit Suisse’s serious organisational deficiencies, but given that neither Lescaudron nor anyone else was convicted of money laundering, it was seen as unfair to attribute such a crime to the bank.

The government-brokered takeover of Credit Suisse by UBS was completed this month, and there is no doubt a desire among both the banks and government to move forward and not litigate the past.  

Lescaudron faked signatures and contrived dummy portfolio statements to illegally transfer millions, primarily from the accounts of his biggest client, Georgian billionaire Bidzina Ivanishvili, in a desperate bid to cover growing losses in other clients’ portfolios. 

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The scheme, in which Lescaudron also skimmed profits for himself, went undetected for almost a decade until his tearful confession in 2015, when a series of outsized stock bets backfired. He later took his own life.

The Geneva Prosecutor’s Office did not have an immediate comment. Spokespeople for Credit Suisse and Ivanishvili declined to comment. 

Credit Suisse has always maintained that Lescaudron was a lone wolf who hid his deception from colleagues. But at least one court has disagreed, saying that the bank turned a blind eye to his wrongdoing.