Isn't Credit Suisse the bank that laundered and legitimized all the money from the drug cartels? They kept getting slaps on the wrist for a bunch of atrocities and bad choices and now finally they are seeing some repercussions of those choices?
Yep. I went and quickly looked them up on Wikipedia. They have a list of controversies so long that the outline of the "controversies" subheading won't even fit on my phone screen.
Drug cartel money, strong ties to the Russian oligarchy, forex manipulation, corrupt dealings with African governments, destruction of records, tax fraud.
Sometimes I wonder if the Swiss newfound love for a weirdly biased neutrality, which goes to the extent of destroying their own military gear instead of selling it to Ukraine, is rooted in appeasing certain Russians who stashed their fortunes in financial institutions such as Credit Suisse.
As you write, you have no real clue about banking. Let me tell you, all that you wrote, and more, much more, can be said about every single big bank out there, anywhere.
How do I know this - I work for one of those, not (and never) CS. Since I started ours is rather spot clean from what I can see (but IT is very far from those who make similar decisions), what I see is regulatory downfall from their fuckups 15-30 years ago. Some of it was outright amoral criminal behavior, but most was due to bad processes and way too much incompetence in ie KYC checks. Too much focus on current cash flow, way too few questions about where the money came from. That's thing of the past in regulated markets (but then you have the whole universe of tax havens, some also in US or conveniently around)
I am more than 100% confident that those controversies have nothing to do with the current mess. CS is failing not because it laundered cartel money, it is failing because it didn't manage risks properly, namely Archegos and Greensill. You guys make it sound like the universes punishes those who do bad things which is laughable.
>> Drug cartel money, strong ties to the Russian oligarchy, forex manipulation, corrupt dealings with African governments, destruction of records, tax fraud.
You might also be thinking of HSBC [1] or Wachovia [2] or possibly one of several Australian banks [3] or maybe this European bank [4] or this one [5], or indeed Credit Suisse.
The thing to know about money laundering is that the rules are basically set by the USA, and after the 9/11 attacks the US made money laundering a strict liability crime. It means you can be found guilty of it even if you didn't know you were doing it, made extensive efforts to ensure you didn't and even if the actual violations were made by someone else not yourself. And money laundering is defined as moving money on the behalf of criminals, or not doing enough to realize you were doing so. How much is doing enough? That's subjective, up to the regulators and they are allowed to do things like tell you you're doing enough then later change their mind and prosecute you for it.
Because it's impossible to successfully comply with such a moving target, every large bank in the world is constantly being fined for AML violations. It doesn't mean much about any specific bank to say it's been fined for that. If it was possible to actually comply, there'd be no crime that involved any financial component any more i.e. no drug trade or fraud, because the banks would always detect it, suspend the accounts, report the owners and seize the money.
Clearly these crimes do still exist because banks don't have enough information to reliably beat all criminals. They don't have police powers, so the most they can do is rely on heuristics. It's especially tough in parts of the world where cartels may have unlimited budgets to beat your systems, corrupt your employees, corrupt government employees or threaten your staff with having their arms chopped off if they don't help out. AML regulations don't recognize these problems as legitimate however, meaning you as a banker can be prosecuted and jailed for up to 20 years because someone, somewhere else in your organization, wasn't suspicious enough about some activity and report it in a timely manner.
That's why it feels like banks are always "getting away with it". Governments, even the US government, can't actually enforce the laws as written because if they did then the entire financial industry would collapse overnight from mass staff exodus. This was the very real risk that led to HSBC being fined rather than directly prosecuting the staff. There was apparently a big fight inside the US Gov about this between the Justice Dept and the Treasury, with (I think) the former wanting prosecutions and the latter pushing for no prosecutions. The Treasury knew that prosecutions could succeed and if they did, there'd be a very different and much worse kind of bank run.
To me, it doesn't seem reasonable to expect bankers to achieve what the world's police forces and intelligence agencies never could. But the public doesn't really understand these dynamics. Whenever they read about banks laundering money, they think it's bankers who are knowingly taking part in organized crime and so demand punitive action. Governments can then blame the banks for crime whilst simultaneously taking some billions of dollars from them for the general budget. In the short term it's a win for them. The true cost is somewhat subtle and long term, in things like innocent people being unable to get bank accounts, or finding it very difficult, and a general feeling of society being rigged in favor of the bankers who never seem to be punished for their claimed crimes. The fix would be a mix of changes to AML rules and the PATRIOT Act, transforming the system into something a lot more mechanical and objective. It might make some crime a bit easier, but that can be counterbalanced by e.g. increased funding to the police.
Selective enforcement of broad regulations like this is one of the hallmarks of a corrupt regime.
The great thing about everybody being guilty is that they can use nudges and winks to force people to toe the line about anything at all, far in excess of the power and authority granted to them by laws on paper. Get uppity and they'll send some goons around to smash up the place.
This not a case of the hapless simpletons in government having a good heart and the right intentions, and yet again bungling the legislation spectacularly, and now they're dutifully serving the people by doing their gosh darndest to keep the financial system from collapsing due to their prior incompetence. These laws and regulations are constructed and implemented by and for the ruling class, for the purpose of increasing their wealth and power.
Wow, this is the best comment I've read in a while. I was one of those ppl who thought that bankers were "getting away with it" but I can clearly see your point here.
Thanks for this comment. This highlight the crux of the issue. Banks should have something like "banking neutrality" where they'll bank anyone and any money until a court order says otherwise.
It's funny most people accept this situation which can significantly abused by lots of parties (See: Operation Choke Point as an example). But if you live in a small village, and there is only one bank branch, the banker there not liking you means you being unbanked for no reason.
That was not my experience. I worked a lot with various banking regulators (Fed, OCC, NFA, British PRA, a bit of SEC, FDIC and probably a few I don't remember now), although not on AML matters. My experience was that before being slapped with a Consent Order, you get warnings. They are either Matters Requiring Attention (MRA) or Matters Requiring Immediate Attention (MRIA). It is highly improbable the regulators just hit you with something out of the blue, just because they feel like that.
Meanwhile KYC and AML makes lives of the average Joe much tougher - banks increasingly ask more documents every time, and more often. It will not stop real criminals anyway, as history shows.
A shocking idea would be to prosecute the source of the ill gotten gains, or the underlying crime, rather than imposing these AML externalities on other actors. After all, something is not money laundering if the funds were legitimate to begin with.
Your point about banks being forced to do what governments cannot is a stretch. Your comparing a thrird party (governments) to a first party (banks). Your drug dealer knows your an addict well before your parents do. Also as another poster said banks get warnings to respond.
You can miss me with this banks are the victim. It has been shown over and over and over from the dawn of Banking that no matter who you are if you have a lot of money there is a bank willing to work with you.
Whether banks should be allowed to do this is a different question but they are absolutely not victims.
<< Governments, even the US government, can't actually enforce the laws as written because if they did then the entire financial industry would collapse overnight from mass staff exodus.
This.
Treasury recently had to send a note via remarks to indicate to banks that 'derisking' resulting defensive SAR filing may be overdoing it. Naturally, some regulators will question every instance SAR was not filed so the banks are in weird "punching bag" position.
While a lot of text written out, this is an extremely weak argument.
It boils down to "they can't do it perfectly so they shouldn't try at all".
And the exact opposite of defense in depth.
Tons of places people will cast a blind eye to things that they know are illegal if they can profit off it. Banking is absolutely one of those areas where there are huge incentives to do so, as it requires no effort and is easy to profit off of criminality.
This law says we're not going to allow you to be part of the broader global system while knowingly profiting off of criminality. Yes you may not catch 100% of it, but you sure have to thoroughly try to eliminate it. And there will be financial punishments to ensure you're not doing it just in name only.
This is exactly what we want in our financial system.
I really don't understand the motivation behind your post. "Let's eliminate a great law for crime prevention because it doesn't prevent 100% of crime?" That makes no sense.
Did the US intervene because the Swiss were taking much of the cartel laundering market away from their institutions?
Banks don't have a good name, it's not just the Swiss. I mean they have a good name among the corrupt and the rich who love their help laundering money, skirting laws, and socializing their losses. Among the common person, regard for banks probably sits somewhere between politician and lawyer.
During world war II the swiss national bank took all of the gold looted by the nazis - these were astronomical sums, it's really a shameful chapter of their history which is not widely known.
In addition to turning back Jewish refugees at the border. Also the swiss government even requested the nazis to mark the passports of Jews, so that they could be better turned down at the border.
Also there was a big court case during the nineties, because credit suisse withheld the money of holocaust victims, while at the same time former nazi officials had no problems with their accounts - all at the same bank.
The entire financial system is built on fraudulent activity. HSBC started by laundering money for opium drug dealers into China, regular scandals, revolving door regulators, etc. The biggest surprise is how the system has not collapsed yet. It would not surprise me if the can is kicked further down the road after some people get a hair cut. It would also not surprise me if the multi polar world goes back to commodity backed currencies...e.g. gold & oil.
If anything it’s the opposite issue that could be the nail in the coffin - wealthy Chinese are pulling their money out after Switzerland decided to adopt sanctions against Russians.
Not stating an opinion but isn't that more of an issue with countries that choose to do business with Switzerland?
Swiss banking privacy and their grey/black practices are sovereign decisions they have every right to make but it appears that countries are willing to turn a blind eye to it. We could wax on about morality but the real issue here is it's tolerated by the rest of the world so they have little pressure to change.
Switzerland doesn't have any unusual banking privacy laws anymore, those were abolished a long time ago. The US imposes crippling sanctions on any country that doesn't implement the same financial crime / tax information laws as themselves, so Switzerland came into compliance with US policy on that.
Alongside all the other banks that allowed trillions of dollars worth of illicit and laundered funds to criminals, drug cartels, etc. Unquestioned.
Seems like the crime on the banking networks pays more than the fines, since both the banks and the regulators get a profit either way helping process transactions from criminals.
But CS says firmly that they don't need government aid. Are they possibly too entrenched with Russian and drug money that they just can't open their books to the swiss government?
This comes after news that there were "material weaknesses" found in their financial reporting the last few years. They also failed to "design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements". Finishing it off with massive outflows of customer funds - larger than anticipated - which has "exacerbated and may continue to exacerbate liquidity risk". Will they survive?
I think a relevant question is who is "they" in this case. We've talked endlessly about the US Treasury and the Fed, but CS is based in Switzerland. A country with a long and storied history of banking independence. The US and EU aren't going to stand by and do nothing since our businesses likely have major exposure but one would hope the Swiss would deal with this appropriately.
CS operates in 50+ countries. All the largest entities have resolution/winddown plans agreed with their regulators. In reality they probably won’t be used because the SNB and Fed will fear contagion.
No, the taxpayers will foot the bill. Can’t have bank CEOs missing out on their hundred million dollar compensation, that would ruin the system! It’ll just be 2008 all over again - the people who screwed up will be rewarded, everyone else will be punished.
That's what the newscycle and everyone else is spinning it as. So, most likely it's just a slow moving crash that we're witnessing but it already happened.
Someone on HN mentioned yesterday that CS is being priced in at a 10% chance of failing in the CDS market. I wonder how much this increases after this news.
Folks need to understand the difference between market cap and enterprise value. To buy a company, you don't only have to buy the shares of stock, you also have to assume all their liabilities.
True, liabilities should be less than assets. But that's why banks are freaking out in the first place.
One of the things that made it harder to convince other banks to buy SVB is the memory of 2008 when banks who bought other banks inherited all their liabilities and lawsuits.
> Why isn’t Dimon buying S.V.B.? He has complained about the headaches of buying Bear Stearns and Washington Mutual at the government’s behest in 2008, having spent years fighting litigation and paying fines for those firms’ bad behavior. Bank executives who were around back then remember that.
It's good to want banks to be punished for causing problems, but if that punishment also applies to people who try to rescue the bank, then nobody is going to try to solve the problems.
If you purchase all of a company's stock, assuming that confers you 100% of voting rights, then you do "own" the company by most definitions, and certainly by the definitions that creditors would use when they demand their money back from your liabilities. In practice, once you own all those shares, you control the board of directors and can vote on how to handle liabilities, for example by using mechanisms like leveraged buyouts to (legally) shift liabilities to a new entity.
The trouble is that to purchase 100% of shares of a company, someone has to sell those shares to you. Just because the stock tanks to $0.01 doesn't mean the board members will sell you all of their shares and voting rights. They don't have to accept your offer.
Ah, but you don't have to actually assume liabilities, you can only lose as much as the purchase price.. So buying a company with 10 billion in debt and 10 billion in cash for $1 isn't $1 overpriced. It is an opportunity to take a 10 billion bet with "heads I win, tails I walk away chuckling."
Yeah but then you immediately own all their debt and liabilities. Which is why SVB UK was sold to HSBC for 1 pound because they were willing to take on all its debt.
CS has been tethering on the brink of bankruptcy for a good while now -- interesting to see if this will finally push them over or not. The Swiss would not be amused for such a stalwart of the banking business to disappear, but...
Oh cool, was gonna mention the similar topic. As a rarity I'm viewing on a laptop right now and the anti-bot wall still doesn't process after holding. I believe this is Bloomberg specific feature as well - just wondering if others have the same problem on wayback but seems from my data points it'd be universal across devices. Thanks to the person below to post another link, will give that a shot
Readit News
Drug cartel money, strong ties to the Russian oligarchy, forex manipulation, corrupt dealings with African governments, destruction of records, tax fraud.
The list is extensive to say the least.
Sometimes I wonder if the Swiss newfound love for a weirdly biased neutrality, which goes to the extent of destroying their own military gear instead of selling it to Ukraine, is rooted in appeasing certain Russians who stashed their fortunes in financial institutions such as Credit Suisse.
How do I know this - I work for one of those, not (and never) CS. Since I started ours is rather spot clean from what I can see (but IT is very far from those who make similar decisions), what I see is regulatory downfall from their fuckups 15-30 years ago. Some of it was outright amoral criminal behavior, but most was due to bad processes and way too much incompetence in ie KYC checks. Too much focus on current cash flow, way too few questions about where the money came from. That's thing of the past in regulated markets (but then you have the whole universe of tax havens, some also in US or conveniently around)
Sounds like HSBC
Dead Comment
The thing to know about money laundering is that the rules are basically set by the USA, and after the 9/11 attacks the US made money laundering a strict liability crime. It means you can be found guilty of it even if you didn't know you were doing it, made extensive efforts to ensure you didn't and even if the actual violations were made by someone else not yourself. And money laundering is defined as moving money on the behalf of criminals, or not doing enough to realize you were doing so. How much is doing enough? That's subjective, up to the regulators and they are allowed to do things like tell you you're doing enough then later change their mind and prosecute you for it.
Because it's impossible to successfully comply with such a moving target, every large bank in the world is constantly being fined for AML violations. It doesn't mean much about any specific bank to say it's been fined for that. If it was possible to actually comply, there'd be no crime that involved any financial component any more i.e. no drug trade or fraud, because the banks would always detect it, suspend the accounts, report the owners and seize the money.
Clearly these crimes do still exist because banks don't have enough information to reliably beat all criminals. They don't have police powers, so the most they can do is rely on heuristics. It's especially tough in parts of the world where cartels may have unlimited budgets to beat your systems, corrupt your employees, corrupt government employees or threaten your staff with having their arms chopped off if they don't help out. AML regulations don't recognize these problems as legitimate however, meaning you as a banker can be prosecuted and jailed for up to 20 years because someone, somewhere else in your organization, wasn't suspicious enough about some activity and report it in a timely manner.
That's why it feels like banks are always "getting away with it". Governments, even the US government, can't actually enforce the laws as written because if they did then the entire financial industry would collapse overnight from mass staff exodus. This was the very real risk that led to HSBC being fined rather than directly prosecuting the staff. There was apparently a big fight inside the US Gov about this between the Justice Dept and the Treasury, with (I think) the former wanting prosecutions and the latter pushing for no prosecutions. The Treasury knew that prosecutions could succeed and if they did, there'd be a very different and much worse kind of bank run.
To me, it doesn't seem reasonable to expect bankers to achieve what the world's police forces and intelligence agencies never could. But the public doesn't really understand these dynamics. Whenever they read about banks laundering money, they think it's bankers who are knowingly taking part in organized crime and so demand punitive action. Governments can then blame the banks for crime whilst simultaneously taking some billions of dollars from them for the general budget. In the short term it's a win for them. The true cost is somewhat subtle and long term, in things like innocent people being unable to get bank accounts, or finding it very difficult, and a general feeling of society being rigged in favor of the bankers who never seem to be punished for their claimed crimes. The fix would be a mix of changes to AML rules and the PATRIOT Act, transforming the system into something a lot more mechanical and objective. It might make some crime a bit easier, but that can be counterbalanced by e.g. increased funding to the police.
[1] https://www.learnsignal.com/blog/hsbc-money-laundering/#:~:t....
[2] https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...
[3] https://www.vice.com/en/article/g5bkyq/drug-cartels-used-aus...
[4] https://money.cnn.com/2018/02/08/news/rabobank-mexico-drug-m...
[5] https://www.newyorker.com/news/news-desk/the-fincen-files-sh...
The great thing about everybody being guilty is that they can use nudges and winks to force people to toe the line about anything at all, far in excess of the power and authority granted to them by laws on paper. Get uppity and they'll send some goons around to smash up the place.
This not a case of the hapless simpletons in government having a good heart and the right intentions, and yet again bungling the legislation spectacularly, and now they're dutifully serving the people by doing their gosh darndest to keep the financial system from collapsing due to their prior incompetence. These laws and regulations are constructed and implemented by and for the ruling class, for the purpose of increasing their wealth and power.
Thanks for putting the time to answer.
It's funny most people accept this situation which can significantly abused by lots of parties (See: Operation Choke Point as an example). But if you live in a small village, and there is only one bank branch, the banker there not liking you means you being unbanked for no reason.
You can miss me with this banks are the victim. It has been shown over and over and over from the dawn of Banking that no matter who you are if you have a lot of money there is a bank willing to work with you.
Whether banks should be allowed to do this is a different question but they are absolutely not victims.
This.
Treasury recently had to send a note via remarks to indicate to banks that 'derisking' resulting defensive SAR filing may be overdoing it. Naturally, some regulators will question every instance SAR was not filed so the banks are in weird "punching bag" position.
It boils down to "they can't do it perfectly so they shouldn't try at all".
And the exact opposite of defense in depth.
Tons of places people will cast a blind eye to things that they know are illegal if they can profit off it. Banking is absolutely one of those areas where there are huge incentives to do so, as it requires no effort and is easy to profit off of criminality.
This law says we're not going to allow you to be part of the broader global system while knowingly profiting off of criminality. Yes you may not catch 100% of it, but you sure have to thoroughly try to eliminate it. And there will be financial punishments to ensure you're not doing it just in name only.
This is exactly what we want in our financial system.
I really don't understand the motivation behind your post. "Let's eliminate a great law for crime prevention because it doesn't prevent 100% of crime?" That makes no sense.
They have done so much more bad things, things not mentioned in this thread.
And after the US intervened, they carried on with the same, just even more sophisticated.
How Swiss banking has a good name should be beyond anyone. Assume it is all careful, decade long marketing and PR stuff.
I in details know about some internal things regarding employee conduct which is Holywood material worthy.
Banks don't have a good name, it's not just the Swiss. I mean they have a good name among the corrupt and the rich who love their help laundering money, skirting laws, and socializing their losses. Among the common person, regard for banks probably sits somewhere between politician and lawyer.
Deleted Comment
During world war II the swiss national bank took all of the gold looted by the nazis - these were astronomical sums, it's really a shameful chapter of their history which is not widely known.
In addition to turning back Jewish refugees at the border. Also the swiss government even requested the nazis to mark the passports of Jews, so that they could be better turned down at the border.
https://www.yadvashem.org/odot_pdf/microsoft%20word%20-%2060...
Also there was a big court case during the nineties, because credit suisse withheld the money of holocaust victims, while at the same time former nazi officials had no problems with their accounts - all at the same bank.
https://en.wikipedia.org/wiki/World_Jewish_Congress_lawsuit_...
https://www.ft.com/content/f80088e4-5f0d-11ea-8033-fa40a0d65...
No. I mean, some, sure, but “all”? Nah, Wachovia [0], HSBC [1], and, well, pick a major bank, really...
[0] https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...
[1] https://www.investopedia.com/stock-analysis/2013/investing-n...
my comment here on switzerland during the second world war. these are really more than a bunch of atrocities, if you ask me.
Dead Comment
Swiss banking privacy and their grey/black practices are sovereign decisions they have every right to make but it appears that countries are willing to turn a blind eye to it. We could wax on about morality but the real issue here is it's tolerated by the rest of the world so they have little pressure to change.
Alongside all the other banks that allowed trillions of dollars worth of illicit and laundered funds to criminals, drug cartels, etc. Unquestioned.
Seems like the crime on the banking networks pays more than the fines, since both the banks and the regulators get a profit either way helping process transactions from criminals.
[0] https://www.buzzfeednews.com/article/jasonleopold/fincen-fil...
[1] https://www.nytimes.com/2020/09/20/business/fincen-banks-sus...
Deleted Comment
(source: https://www.cnbc.com/2023/03/14/credit-suisse-finds-material...)
I feel like we are close on the verge of a event that sets off the recession. It feels like the banking sector is going to be the fuse again.
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Dead Comment
https://news.ycombinator.com/item?id=35152175
True, liabilities should be less than assets. But that's why banks are freaking out in the first place.
> Why isn’t Dimon buying S.V.B.? He has complained about the headaches of buying Bear Stearns and Washington Mutual at the government’s behest in 2008, having spent years fighting litigation and paying fines for those firms’ bad behavior. Bank executives who were around back then remember that.
https://marginalrevolution.com/marginalrevolution/2023/03/se...
It's good to want banks to be punished for causing problems, but if that punishment also applies to people who try to rescue the bank, then nobody is going to try to solve the problems.
The trouble is that to purchase 100% of shares of a company, someone has to sell those shares to you. Just because the stock tanks to $0.01 doesn't mean the board members will sell you all of their shares and voting rights. They don't have to accept your offer.
/s in case anyone was wondering.
pilfer physical assets by selling them to companies you control
wait for company to go bankrupt anyway
CS has been tethering on the brink of bankruptcy for a good while now -- interesting to see if this will finally push them over or not. The Swiss would not be amused for such a stalwart of the banking business to disappear, but...
Deleted Comment
Dead Comment