The Swiss financial regulator FINMA has rebuked Julius Baer for serious failings in its anti-money laundering (AML) controls between 2009 and 2018 and barred it from making any major acquisition until it implements remedial measures.
The lapses are associated with corruption linked to oil firm PDVSA and world soccer federation FIFA.
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The revelation was the result of a probe, which highlighted systematic risk management failings at the bank.
According to FINMA, bulk of the more than 150 sample transactions and nearly all of the 70 business relationships chosen on a risk basis revealed irregularities.
The regulator also accused the bank of not doing enough to determine the identities of clients, establishing the purpose of business relationships, and reacting to money laundering red flags.
Besides, the information in KYC documentation was ambiguous or incomplete, alleged FINMA.
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By GlobalDataFINMA’s probe also flagged misplaced incentives, which were mostly geared towards financial targets and ignored compliance and risk management goals.
Remedial measures ordered by FINMA
The regulator has ordered Julius Baer to implement a series of measures to address the issue.
These measures include setting up a board committee that will focus on compliance issues as well as making remuneration and disciplinary policy amendments.
The watchdog also directed the bank to implement a process for identifying advisers dealing with a high-risk client portfolio.
An independent auditor recruited by FINMA will supervise the implementation of these measures.
Response by Julius Baer
Julius Baer has acknowledged the findings and said that it has now significantly strengthened its control system and compliance processes.
The bank further stated that it has cooperated with the regulator during the probe and conducted an internal investigation as well to address the shortcomings.
Julius Baer Group chairman of the board of directors Romeo Lacher said: “We accept FINMA’s findings and regret the shortcomings identified in our business with Latin American clients. This is not compatible with the risk culture that we are striving to achieve.
“Julius Baer has invested substantially over the past few years in strengthening our compliance and risk management processes to make them fit for the challenges of the future and, as part of our new strategy, we will continue to invest forcefully in these areas.”
