By Samantha Bader, Co-President
Switzerland has long been known as one of the banking capitals of the world. Their banks have a reputation for being fiercely private, and operating with little government interference. However, a case currently being waged in Swiss court could change all that. Credit Suisse, one of the largest banks, is on trial for money laundering. It’s the first instance in which a major Swiss bank has had an indictment brought against it, and could have long-term consequences.
Prosecutors for the Swiss government alleged that the bank allowed members of a Bulgarian drug ring to launder $146 million Swiss Francs over a period that spanned from 2004 until 2008. The prosecutor’s focus has been on relationships between former Bulgarian wrestler Evelin Banev, multiple associates of his and the bank, specifically one former Credit Suisse employee. Banev, who has been arrested for drug trafficking outside of Switzerland, is supposed to have used the proceeds from drug running to purchase Swiss and Bulgarian real estate.
The bank has denied any wrongdoing. When the trial opened on February 7th, a spokesperson was quoted as saying, “Credit Suisse unreservedly rejects as meritless all allegations in this legacy matter raised against it and is convinced that its former employee is innocent.”
Allegedly, the tactic used to launder the money is what is known as smurfing. In smurfing, large sums are divided into smaller values that are less likely to raise red flags of illegal practices. These small value bills are then put into safety deposit boxes before being deposited into legitimate bank accounts. The gang, allegedly with the help of a Credit Suisse relationship manager, used this tactic successfully for many years.
According to the indictment released by prosecutors, Banev’s “main offense was committed in February 2006, when he transported the equivalent of more than 4 million Swiss francs in small denomination notes hidden in his car from Barcelona to Switzerland.”
Credit Suisse has two main lines of defense. Firstly, the bank is planning to argue that Banev was a legitimate businessman in the construction and hospitality industry. Secondly, Credit Suisse, which considered Bulgaria a high risk country for money laundering at the time period in which these crimes are alleged to have occured, is planning on drawing focus to a series of phone calls the bank made to the Swiss authorities after they saw that Banev was arrested and later released in Bulgaria in 2007. Their argument is that the bank’s compliance department tried to voluntarily alert Swiss authorities to what Banev was doing, but that the government never followed up.
As this is the first time a major bank has been placed on criminal trial in Switzerland, the stakes of this case go beyond a simple verdict. The government is seeking damages of $45.86 million USD, whereas Credit Suisse is angling for a much smaller fine. However, with Swiss banking regulations being a carefully guarded secret, and banking playing such an important role in the larger Swiss economy, a stronger stance on crime and fraud from the Swiss government may disrupt the current banking ecosystem.