The FCA takes action on financial crime due diligence

The FCA has handed down a fine of over £147 million to Credit Suisse for financial due diligence failings relating to loans made to the Republic of Mozambique (its second-largest fine for financial crime failings). The FCA describes the loans as “tainted by corruption” and it has been agreed that debts of US$200 million will be cleared as a result. Charlotte Gregory reviews the case.

The FCA has reprimanded Credit Suisse for not properly managing the risks of financial crime in its emerging markets portfolio. It states the firm had sufficient information to understand the risk of bribery and corruption relating to two loans and a bond exchange in Mozambique.

There was evidence of significant kickbacks being awarded to individuals in the Credit Suisse management teams. The firm was made accountable for insufficient challenge, scrutiny or inquiry on the part of its control function and senior managers. The principle breached were Principles 2 and 3 of the FCA’s Principles for Business, namely, a failure to take reasonable care to organise and control its affairs responsibly and effectively, and a failure to effectively conduct its business with due skill, care and diligence.

The fine was reduced on the basis that Credit Suisse agreed to cooperate with the FCA and to provide the debt relief.

The case highlights the importance of anti-bribery controls for all companies and the consequences when warning signs are ignored or senior managers look the other way. The FCA, in bringing this fine, is highlighting to the industry the seriousness of not conducting proper due diligence and not taking action where there are jurisdictional concerns. It is a reminder that companies of any size can fall foul of the FCA’s rules if management structures do not provide sufficient scrutiny or where a business chooses to conduct risky transactions, there is no explanation or record made of how senior managers justify and monitor those risks.

If you think you may need some guidance in drafting, implementing or updating bribery and corruption policies and procedures, our Financial Services team can help.