Finma penalises Julius Baer for money laundering

Ridhima Sharma
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Finma penalises Julius Baer for money laundering

The Swiss Financial Market Supervisory Authority (Finma) has found that Julius Baer fell significantly short in combating money laundering between 2009 and early 2018.

The shortcomings arose in connection with alleged cases of corruption linked to Petróleos de Venezuela SA (PDVSA), an oil company, and FIFA, the world soccer federation, resulting in enforcement proceedings on the part of Finma, which have now concluded.

Finma has instructed Julius Baer to undertake effective measures to comply with its legal obligations in combating money laundering and rapidly finalise the measures it has already started putting in place. Moreover, Julius Baer must change the way it recruits and manages client advisers as well as adjusting remuneration and disciplinary policies.

Julius Baer cooperated extensively with Finma, assisting in the investigation and conducting its own comprehensive investigation in parallel, both in-house and with the assistance of independent experts."

The Board of Directors must also give greater attention to its AML responsibilities. Furthermore, Julius Baer is prohibited from conducting large and complex acquisitions until it once again fully complies with the law. Lastly, Finma will appoint an independent auditor to monitor implementation of the above-mentioned measures.

Julius Baer took note of Finma's announcement regarding the closure of the proceedings in the FIFA/PDVSA case and acknowledges in principle the conclusions regarding shortcomings in the fight against money laundering. These shortcomings affected certain areas of the Group's Latin American business in the period from 2009 to early 2018.

Julius Baer cooperated extensively with Finma, assisting in the investigation and conducting its own comprehensive investigation in parallel, both in-house and with the assistance of independent experts.

The identified deficiencies have been addressed, and in particular the Bank's control system as well as compliance processes have been improved and strengthened significantly, both in terms of personnel and in the context of in-house rules and management principles. Julius Baer notes that Finma has expressly acknowledged these measures in its assessment.

The Group has adapted its strategy under its new leadership. In future, its focus will shift from new money growth to sustainable profit growth. 

Region Latin America has been under new leadership since December 2017, and new appointments have been made to all key positions. The region's strategy has been completely overhauled, including the introduction of a market-specific focus that has resulted, among other things, in the closure of the local business in Panama and Venezuela.

The bank undertook a comprehensive programme over the last two years to strengthen its global risk management, and made new appointments to key and leadership positions. This programme addressed many of the weaknesses identified by Finma. Further investments and measures are being implemented with high priority.

The documentation standards for client data and active client relationships have already been further developed and improved. Both the front office and the control units were extensively involved in this project (‘Atlas'), which was completed on schedule in late 2019, to ensure that the associated cultural transformation would be embedded in the organisation with lasting effect.

The effectiveness of the compliance function has been significantly improved thanks to substantial investment in staff - with headcount up by some 40 per cent in recent years - as well as in processes, technology and data analysis. In addition, considerable sums have been and continue to be invested in enhancing transaction monitoring and combating money laundering. It will also adapt its incentive and compensation systems to correspond with its risk standards.

A version of this article was first published by Investment Europe