In a press release on Monday, the Swiss Financial Market Supervisory Authority (FINMA) announced the definitive findings of an "on-site control" procedure launched in 2021 on the Swiss subsidiary of the Lebanese banking group Bank Audi.

The Swiss financial watchdog considers that "Bank Audi (Suisse) SA has failed in its obligations to prevent money laundering and has thus seriously violated the rules of financial market law."

Bank Audi has not yet responded to our requests.

What is the bank accused of?

More specifically, FINMA has criticized the bank for failing to "submit" an internal report in which its employees themselves pointed out "shortcomings in the prevention of money laundering in connection with certain business relationships, and demanded corrective measures."

The AMF also claims to have "found that the bank had not sufficiently clarified the origin of the assets of certain high-risk customer relationships," citing "a payment from a politically exposed person that arrived in the account of a senior Lebanese official."

Pointing out that the suspicious amounts had "subsequently been transferred," FINMA adds that the bank had "refrained from making a report to the Money Laundering Reporting Office-Switzerland (MROS)" even though it "could not corroborate the purpose of these transactions."

The AMF argues that "in other cases of client relationships with politically exposed persons in other countries, there were press reports of assets potentially obtained illicitly by these persons," which should have led the bank to "investigate these suspicions. It considers that through this failure, Bank Audi's Swiss subsidiary has seriously breached the legal provisions on money laundering."

What measures have been taken?

FINMA stresses, however, that the subsidiary has cooperated fully with its departments "during the enforcement proceedings" and has already taken "corrective measures" to turn things around. "In particular, [Bank Audi] has made personnel changes in several key positions and significantly increased resources in the area of compliance," the Authority continued.

It added that the bank had also "thoroughly clarified certain customer relationships and made several MROS disclosures," the Money Laundering Reporting Office. "The bank has also separated from a number of customers, but has decided to maintain certain high-risk customer relationships," notes FINMA. The press release does not disclose the identities of any of the clients or staff members behind the bank's setbacks.

FINMA has not contented itself with these corrective measures and has ordered "the confiscation of unduly acquired gains amounting to 3.9 million Swiss francs" or $4.34 million at current exchange rates. "Due to the remaining customer relationships with a high-risk profile," FINMA is also requiring a minimum capital strengthening of 19 million Swiss francs ($21.15 million) to address these risks. By way of comparison, this represents around 10 percent of the subsidiary's eligible capital as recorded on its 2022 financial balance sheet that for 2023 has not yet been published.

In addition, "FINMA is ordering further corrections to the anti-money laundering system." It also prohibits Bank Audi Suisse from taking on new customers who are "politically exposed persons" or profiles "presenting increased risks" while these measures are being put in place, or "for two years." It also assures "that it will have the implementation of these measures monitored by an audit manager."

As "the persons presumed to be primarily responsible for the breaches of supervisory law have left the bank and the Swiss financial center," FINMA has indicated that it will not be pursuing them.

No direct accusations

Neither FINMA's press release nor Bank Audi's response reveals the identities of any of the customers or staff responsible for the bank's setbacks.

Bank Audi – along with BankMed, HSBC and Julius Baer – is one of the banks targeted by one of the complaints lodged with FINMA in 2022 in connection with the alleged financial offenses of former Central Bank Governor Riad Salameh. The Swiss subsidiary of the Lebanese banking group is also one of the 12 banks which FINMA announced, in early 2023, to have launched investigations in the wake of the same affair.

What seems certain is that the "payment to a politically exposed person" made to "the account of a senior Lebanese official" does not appear to be linked to the Salameh affair, in which suspicions relate to $330 million transferred to Swiss accounts via the offshore company Forry Associates Ltd, registered in the British Virgin Islands.

The fact that FINMA has announced that it will refrain from prosecuting those presumed to be primarily responsible for violations of supervisory law "could be interpreted as an attempt to control the collateral damage of such a case, in which the effectiveness of supervisory procedures in Switzerland could be seriously called into question.