"The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique."
The regulator says that the loans were "tainted by corruption". Credit Suisse has also agreed with the FCA to forgive US$200 million of debt owed by the Republic of Mozambique as a result of the tainted loans.
The investigation found that between October 2012 and March 2016, Credit Suisse failed to properly manage the risk of financial crime within its emerging markets business. It had sufficient information from which it should have appreciated the unacceptable risk of bribery associated with the two Mozambican loans and a bond exchange related to government sponsored projects.
Credit Suisse was aware Mozambique was a jurisdiction where the risk of corruption of government officials was high and that the projects were not subject to public scrutiny or formal procurement processes. The contractor engaged by Mozambique on the projects was described as a “master of kickbacks”.
The contractor secretly paid significant kickbacks, estimated at over US$50 million, to members of Credit Suisse’s deal team, including two managing directors, in order to secure the loans at more favourable terms.
While those Credit Suisse employees took steps to deliberately conceal the kickbacks, the FCA says warning signs of potential corruption should have been clear to Credit Suisse’s control functions and senior committees.
In a statement, the FCA said: "Time and again there was insufficient challenge within Credit Suisse, or scrutiny and inquiry in the face of important risk factors and warnings."
The Republic of Mozambique has subsequently claimed that the minimum total of bribes paid in respect of the two loans is around US$137 million.
The FCA took into account Credit Suisse’s undertaking to forgive US$200m of debt owed by the Republic of Mozambique when determining its financial penalty. Credit Suisse also agreed to resolve this case with the FCA, qualifying it for a 30% discount in the overall penalty. Without the debt relief and this discount, the FCA says it would have imposed a "significantly larger financial penalty".
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "The FCA’s fine reflects the impact of these tainted transactions which included a debt crisis and economic harm for the people of Mozambique. The fine would have been higher if not for Credit Suisse agreeing to provide the debt write-off of US$200 million. The FCA will continue to pursue serious financial crime control failings by regulated firms."
